The Lemon Fool

Hi,

I've only ever lived in one property which i bought as a first time buyer. I'm now looking to move but as properties are going so fast I appreciate sellers don't want to wait for someone who has to sell theirs before being able to move.

Is there anyway therefore to be able to unlock the value of my house and use it to buy another without having sold mine first?

I own my house, it has a very small mortgage which I only keep going due to it being on better rates that are available anywhere today and could be used as a cheap source of finance if needed.

I am happy to take on another mortgage and use savings to purchase another home but this wouldn't be enough for what i want. Would equity release be a possible solution, a bridging loan or are there any other options?

Thanks

What you need is a bridging loan from a bank, securitised on the equity in your existing property.

Whether you can successfully get a mortgage to buy a new home whilst your existing home is loaded up with debt is another matter of course. But bridging loans are traditionally the way to finesse a situation like that.

In the current credit climate you might just have to give your first born to the bank for collateral.

When I have moved I have always bought first, pushed the settlement date as far out as possible, and then put my existing house on the market. It has usually worked but the last time I did it I came unstuck and had to resort to a bridging loan, although it was secured on the new property. My existing property was unencumbered which no doubt helped.

The alternative is to sell first and then buy but in the current climate that is probably more of a gamble than usual as the price for the new property could run away from you unless buying a new build.

Dod

Bridging loans should not be problem, particularly as your mortgage is small. Banks love to lend, as long as there is good security.

I did get in a bit of mess with house moves 40 years ago and at one point had 3 houses. Bridging loans sorted it

We have done this a couple of times.

It really helps if your current home is mortgage free and you have no outstanding debts.

The first time was in 2004. MrsF's "Cash Buyer" suddenly didn't have the cash as her flat sale fell through(!). The risk was the chain fell apart, and as we already both had our own houses bought and paid for (we weren't married at the time) the joint equity was more than the new property. We had arranged a mortgage for the difference from MrsF's house to the new one, and in hindsight surprisingly easily persuaded Virgin to up it to nearly 5X joint salary as a 90% LTV offset mortgage on the new property, and the sale continued. EIGHT MONTHS later when her old house finally sold we reduced the mortgage by over 80%. No extra stamp duty in those days but 6% interest rates.

The last time was 2 years ago. In this situation we knew we wanted to move, and where to, so got our ducks in a row and got a 0.7% loan on the marital home (this time only 50% LTV, but oddly the same figure as the original mortgage). With our other savings and an inheritance this meant we could afford our current house. Then Covid arrived so the sale was halted by the first lockdown. There followed a nervous couple of months where we worried about owning 2 homes in a freefalling market, so we pulled out all the stops to get the old one ready for market, took the pictures, sent them to agents, etc, and the day after lockdown lifted we started viewings. 4 hours later we had an asking price offer, so went ahead with the current purchase.
It took 7 months to complete the old sale, but the interest rate dropped to 0.49%.

I put those 2 tales in there to illustrate one important thing, in both cases it was over 6 months before the other houses sold, even though they were already on the market and had offers. You need to consider if you can afford to run 2 properties for a prolonged period of time, possibly in a stagnating market with rising interest rates, and personally I suspect the house market will cool in the current economic climate.

So it appears you have 3 options....
Remortgage your current home, and use the cash with savings to move up.
Clear your current mortgage, and see how much you can borrow against a new property.
Get a bridging loan.

Personally I would avoid a Bridging Loan if at all possible, they are expensive to arrange and service, and if you have to do it for more than 6 months AND run 2 houses, things can get tight.

Oh, option 4, wait 6/12/18 60 months until sanity returns and buy in a chain like people used to do

Paul

We did "let to buy" which is where you keep your old home and turn it into a BTL.

It's not for everyone but it did allow us to move chain-free, and it becomes another stream of income. Obviously it means that we have a bigger mortgage on our new primary residence, but we are taking the long view on that and letting a couple of decades of inflation do the work for us.

Ask a muslim friend. My neighbours have changed three times in 15 odd years without the house ever having been sold. Obviously using some method to avoid selling costs/stamp duty.