Yes, it is possible to buy a new house before selling your current property.
There are a couple of different options for you depending on how much the new property is worth in relation to your current one and on your own suitability for a mortgage.
If your current property is worth more than the new one you may be able to raise a mortgage on it for the full cost of the new one. If you are eligible for a normal residential mortgage then you just need to make sure that the product you choose does not have any early redemption penalties, so you can sell your home and repay the mortgage without having to pay £1,000s for the honour. If you do not qualify for a standard residential mortgage, then you may still be able to arrange a bridging loan. These can be secured either against your existing home or both properties and again would be repaid upon sale. They tend to be more expensive than a normal mortgage because of their short-term nature.
Alternative Finance Options
If the new property is more expensive then you will probably have to arrange a bridging loan on your current home to cover the deposit and a normal mortgage on the new property. Again you will need to make sure that the new mortgage gives you the flexibility to reduce the amount outstanding once you have sold your current home without being penalised.
To summarise here are a few common ways to approach this situation:
- Bridge loan – a bridge loan is a short-term loan that can provide financing to bridge the gap between the purchase of a new home and the sale of the current one. This type of loan can help cover the down payment and closing costs for the new home while you wait for your current home to sell
- Contingent offer – you can make an offer on a new home contingent upon the sale of your current property. This means that the purchase of the new home is dependent on successfully selling your existing home within a specified timeframe. Sellers may or may not accept contingent offers depending on market conditions and their own preferences
- Home Equity Line of Credit (HELOC) – if you have sufficient equity in your current home, you may be able to secure a home equity line of credit (HELOC) to use as a down payment on the new home. Once your current home sells, you can use the proceeds to pay off the HELOC
- Renting out your current home – if you’re unable to sell your current home before buying a new one, you could consider renting it out instead through a process called let to buy. This would allow you to release equity and generate rental income to help cover the mortgage
Each of these options has its own advantages and considerations, so it’s important to carefully evaluate your financial situation and consult with a financial advisor or mortgage lender to determine the best approach for your specific circumstances.
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 023 8235 2300 and one of our advisers will then be able to help you find the right solution for your situation.
