Ways to buy new house before selling old one

[happymonkey36]

Hi there,

We bought our house 8 years ago and are getting to the stage where we really need to move somewhere bigger in the next year or so. Our children share a room which is fine at the moment, but we know as they get older they'll need their own space (son is 6 and daughter is 8) and I would LOVE a second bathroom!!

We love the village we live in - it's great, nice walks, school is lovely, have friends etc so we want to stay here but houses don't come on the market very often and are snapped up quickly. We've watched quite a few people try to find bigger houses here over the last few years and it looks like a nightmare - many sell their original house quickly but then nothing bigger is on the market so they either buy something that doesn't suit or have to move to a different village/town. We really don't want to end up in the same situation - we love our village and would love to stay in our wee house until something comes on the market, buy that first and THEN sell our house. However, money is an issue!

We bought our house for £200,000 and have paid off our mortgage so we own it outright. We have a meeting with a mortgage broker next week but online calculators have shown that they will probably lend us up to £250,000 so that plus money from our house would get something really lovely, but £250,000 by itself wouldn't get us the extra bathroom/bedroom in the village we want.

We wondered about getting a bridging loan so we could use that + mortgage to buy a house when one came on the market and then pay it off when we sold our house afterwards. I know they are expensive but surely that would work out cheaper than selling our house first, moving to rental accommodation for x number of months and the costs (and stress) of two house moves rather than one?

The other option could be remortgaging our house to release say £100,000 of capital which could sit in premium bonds until we needed it and act as a big deposit. But could we then be able to get a big enough mortgage number 2 to buy the bigger house when we needed?

What do you think is the better idea or is there something that we've missed? We really want to avoid moving to a rented place in between if we can as I think the stress of two moves would be awful. I'm in Scotland, if that matters?

Thanks so much. I'll post this in Property too.

1. Sell and rent
2. Let - to - Buy - Remortgage your currernt house to release money for a new purchase.

re point 2 - this will affect your mortgage affordibility and also incur the second home stamp duty surcharge.

If you can number 1 will put you in the most powerful position when buying. In essence you are first time buyers with no chain, so you jump to the top of the pile for the buyers preference.

Briding loans are very expensive, circa 1.5% + per month interest, rolled up and charged at the end. What happens if you dont sell within 18 months?

Thanks fromdownwest. I had a feeling selling + renting would be the most sensible option, it just sounds really stressful! But hopefully it would be worth the stress if it got us a lovely house. Thanks for your advice :)

I totally get why you want the flexibility of staying in your own home until you find the perfect place. It makes sense if you can make the finances work. Option 2 is the better one, remortgage your current place and have the deposit ready for when you find the next one. Additional 3% SDLT is payable but can be claimed back as long as you sell your current property within three years after buying the next one.
Bridging loans are really best avoided unless you are desperate. Options 1 is the best way to go but you haven’t said what your household income and other debts are. You may be able to get that second mortgage at a very high LTV while you sell your current property, if your household income allows.

Thanks so much sst1234. Some really useful advice there. I would hope our house would sell quickly so we could claim back the Stamp Duty, but I'll need to sit down and do some sums to figure out how much we would lose if it didn't sell in time. We are in Scotland so it's 4% not 3% (and it has a different name!). When we meet with the mortgage broker we can look at buy to let mortgages in detail and see if it would work. Otherwise we'll need to just deal with the stress and look at moving to rental though there also aren't many rental properties around in our area!!! Maybe I should start playing the lottery?! A nice lottery win would solve this problem!!!

Another consideration is council tax. Depending on your situation and your local authority, you may be liable for council tax on both houses and may or may not be eligible for a discount on one property. Depending on how long your current house took to sell, you may then be liable for an additional surcharge of up to 100% of the council tax charge. Not wanting to scare you, just raise the council tax point for you to include in your research in case you hadn't considered it.

Is there definitely no way to increase your current property to add a bedroom and bathroom? Loft conversion maybe? If you love your house and location, then is there definitely no way to extend? (I’ve just caught up on love it or list it, which may be influencing me here!!)
To upsize in the location I’m in and make it worthwhile, I’d need at least £150k if not £200k. But my current house could get somewhere near to that for much less (making compromises like staying in a semi etc). Just wondered whether you had considered building work?