Ways to buying a new house before selling the 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.

Just wanted to say please don't do the bridging loan route, I did that last year, the interest is incredible and you get a very set time limit where it has to be paid off. It caused me so much stress that I will NEVER do it again. Our solicitor also gave us a very raised eyebrow when we applied for it and asked us about 10 times if we were sure. We had to do it as our dream house came up, we were moving across country, had new jobs and my partners house just wasn't selling but I really wouldn't recommend it.

Surely you can just save 2k a month or whatever so you have deposit in next 2 or 3 years?
24k a year is 68k in 3 years
Instead of paying interest on a loan

You could mortgage your current house with a BTL mortgage, rent it out and use the money from that plus the new mortgage to buy somewhere bigger. You'd have to pay higher stamp duty though.

If you sold and moved into rented, you'd be a much more attractive buyer. You'd have a big deposit and would be getting an easily affordable mortgage.

With the bridging loan etc, then you would be a higher risk buyer because that would be at higher risk of not working out etc and the whole process collapsing

So if your village is super competitive to buy in, perhaps consider putting yourself in a position where you are the most attractive buyer

I posted this on another thread a few days ago. We were in a very similar situation, lived in a tiny house in our perfect village and didnt want to leave but very few things come on. We ended up finding someone in the village who was wanting to move and they very kindly agreed to let us sell ours first and then we bought theirs from them. You could ask people in the properties you potentially would want to let you know first if they are planning to sell.

I would bite the bullet and go into rented. You could do an equity release as you say, best of speaking to a good mortgage advisor for your options. Also don't forget that you'll be on the hook up front for the second home extra duty if you haven't sold your first place.

We did the 2nd option but sold within 2 years so that we could reclaim SDLT paid on the new property.

We looked at a bridging loan for 600k and it was going to cost us £10k a month. We moved into rental

The limit could be 3 years but we sold within 2.

A Let to Buy mortgage plus a normal mortgage? This what we planned to do if we didn't sell as like you we had a lot of equity. However if the market goes down in the short term you could lose money...

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

Yes moving is stressful. And two moves, also stressful. But nothing in comparison with the potential stress of taking out a bridging loan to buy house no2, and then not being able to sell house no1. And then seeing the housing market start to slide, as it VERY well may do later this year. It could all collapse like a house of cards, with you owing a lot of money at a very expensive rate of interest.

I wouldn't be "long" on property for anything at the moment.

Bite the bullet. Sell your house. Move into rental. Become the perfect buyer with what a nearly 50% deposit, and no chain. And then pounce when your perfect house comes up.

The property market’s growth will slow but the jury is out when it comes to whether prices will head in reverse. So far there is little evidence to convincingly say prices will fall. Many think post Covid that house supply will be greater that demand. I don’t see it myself. A slow down but nothing like the financial crash. This crisis is not a financial one and many will lose their jobs but most of those losing their jobs are in the rental market.

That’s just my thoughts. I am not an expert but there is no unanimous consensus amongst the experts. Your prediction is as good as mine

Don't get a bridging loan. People used to get into terrible debt with them when they were more popular. I think rented is the answer though it's a big step.

Equity release + BTL mortgage (this won't impact your borrowing ability for the new mortgage)
Pay higher SD and buy the new house
Then sell the old house and claim back SD

The big catch will be that you can't take a cheap BTL with a fixed rate for couple years as that will attract Early repayment charge when you sell. You might need a variable rate BTL mortgage which will be twice as expensive but hopefully not for long.

If it's a nice village and you know a few people, I'd suggest put word about that you want to move to x road or y road and need a 3/4/5 bedroom. I've a friend lived in the best road in the next village did this - moved to a bigger house in the same road, they were offered it without it going to market. Their old house was up together in a ready-to-market mode for about 18 months so the instant they were offered it, they arranged the EA to do an open house on theirs & sold the day it went on the market.

We did this and got an interest only loan via broker for part of new property (roughly 30%). It's only about £180 a month though obviously 2 sets of bills.

I guess extending is out of the question? Or thinking laterally, we once bought the cottage next door to our large house and knocked through.....worth asking the neighbours if they plan to sell in the next year or two?

Thank you so much to everyone for replying - I appreciate you taking the time and your advice is really useful. I will stay well away from bridging loans now - I was already a bit wary but now I am convinced that they are NOT the way forward!

Sadly there is no way we could extend as the garden isn't big enough and our neighbours are very happy where they are and have no plans to move anytime soon so no chance of buying their house and knocking through.

I will explore the BTL second mortgage idea further and also selling and moving into rented accommodation. I know that's the most sensible answer but the thought of it is daunting. However, it would be amazing being able to pounce if the dream house came on the market!! We'll also put notes through doors of streets that we love and keep our fingers crossed. Thanks so much for your help :)

My only worry about selling, renting and then buying is some kind of change in life circumstances (redundancy, illness, credit file error, etc) which suddenly stops you being able to get a mortgage once you have sold up and renting. Depends on your circumstances, of course, but to a lot of people, especially at the moment, that would be a big risk.