How to buy a house when you haven’t sold yours(UK)
In this brief guide, we are going to discuss how to buy a house when you haven’t sold yours in the UK.
The issue with starting the house buying process when you haven’t sold your house is you run the risk of starting a property chain which may affect various people.
You may notice that most sellers will not entertain your interest in their property if you haven’t already sold your house or are at an advanced stage of selling your house.
How to buy a house when you haven’t sold yours (UK)?
If you want to buy a house when you haven’t sold yours then you can simply get a bridging loan which you can use to either buy another property in full or to fund your mortgage deposit for another property.
You will need to pass much stricter mortgage affordability checks by proving you can continue to make both monthly mortgage repayments on both your mortgage and the bridging loan.
What are bridging loans?
Bridging loans are short term finance used mostly for commercial real estate. Bridging loans help bridge the gap between to activities such as moving homes, renovating a home to get a standard mortgage or when you are buying a house but haven’t sold yours.
Bridging loans are essentially short term loans that help you bridge a gap.
Raise finance from your existing home.
If your current house is worth much more than the one you want to buy and you may have enough equity in your current house as well as enough savings.
You could potentially get a new mortgage (or mortgage advance) on your current property and use the equity your release plus your savings to buy a new house in cash.
You could then get an unencumbered mortgage on your new property just before your old house is about to sell and use the funds from the unencumbered mortgage as well as the funds from the house sale to clear your mortgage balance on your first home.
To do this you should ensure the mortgage on your first home does not have any high early repayment charges.
This process may seem complicated and a mortgage broker may be best placed to advise you.
Using a let to buy mortgage
You can also use a let to buy mortgage to buy a house when you haven’t sold your house.
A let to buy mortgage will allow you to convert your current home into a rental home where the rental income is used to pay off the mortgage on the property.
You will then be able to geta a residential mortgage as part of the let to buy mortgage. This will allow you to buy a house without having to sell your current house.
A let to buy the mortgage in effect gives you two mortgages- a buy to let mortgage for your existing house and a residential mortgage for the new house you want to purchase.
The good thing about a let to buy mortgage is that the rental income generated on your first property is used to cover the monthly mortgage repayments and hence you can use your current personal income to pay off your new residential mortgage, just as you were doing with your old property.
This means the mortgage affordability requirements may not increase, even though you will essentially have two mortgages.
This means you can buy a house without selling your house.
Let to buy mortgage calculator
You can use a let to buy mortgage calculator to see how much you can afford with a let to by mortgage.
You should remember that a let to buy mortgage calculator will only display numbers for guidance and this does not represent your true mortgage affordability.
Use a mortgage broker
You may want to consider using an independent mortgage broker to get a mortgage.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.
This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle.
This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your mortgage is indeed a possibility before you make a full mortgage application.
Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month.
It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.
Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.
They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.
In this brief guide, we are going to discuss how to buy a house when you haven’t sold yours in the UK.
If you have any questions or comments please let us know.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.