How can we get a mortgage to enable us to buy before we sell?

Posted on 10 January 2014 by Phil

How can we get a mortgage to enable us to buy before we sell?

We have a mortgage of £60,000 (11 years left to pay) on our current home (market value £170,000). Can we get a second mortgage to buy another property (value £200,000) that we've seen to secure the purchase before we sell our current home. We are both in full employment with a joint income of circa £50K?

Your equity of £110,000 in your current property could only be released in full only when the property is actually sold. However we could look at potentially takinge a second charge with your existing lender or a third party secured loan company, though the latter could be quite expensive. This option will allow you to release only a percentage of the available equity which will not be sufficient to purchase the new house outright.

Therefore, if you are looking to borrow £200,000 for the new property, you would need to look at  splitting the loan and leveraging the debt across the two properties. In addition, you may also contemplate the option of keeping the existing property and letting it out until a suitable buyer is found. In this scenario, the current home can be re-financed on a Let to buy basis with a mortgage of say, £110,000 made up of the existing mortgage of £60,000 and £50,000 capital raising as a deposit towards the new property. The new property will also have a mortgage of £150,000 on a value of £200,000 with £50,000 released from the current home. On completion the current property will be let and you will move into the new home. When the old property is sold, the equity or part of it can be used to redeem some of the mortgage on the new home. We deal with similar transactions on a day to day basis and one of our specialist will be able to help you.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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