Posted on 11 October 2016
I am selling my homer at a value of £280,000. My buyer has just pulled out and I am worried I am going to lose out on a property I have had an offer accepted on worth £350,000. I will have to pay back £80,000 once my property is sold with a further £12,000 in costs. I need to retain £20,000 equity to furnish the new property. My equity/deposit will be £170,000 my loan amount is £180,000 over 15 years with Coventry Building Society. Can my equity be released so I do not lose out on the house I want?
Thanks for your question. You'll be glad to hear that this type of scenario isn't uncommon in the mortgage world and and there are a number of options for you to consider.
The first, would involve renting your current home and raising finance by way of a Let to Buy mortgage. Looking at the figures involved and taking in to consideration the fact that most lenders offering this type of mortgage will restrict borrowing to 75% of the property value, it would mean your new residential mortgage would need to be increased to allow for a smaller deposit. Subject to meeting rental stress tests for the Let to Buy application and residential affordability requirements for the increased residential mortgage you'd need, this may be one option open to you. You would need to consider that there would be an additional £10,500 surcharge for Stamp Duty Land Tax which you would be liable for as you would be retaining your current property rather than replacing your main residence. But this would be refunded (subject to current rules) if you sell the old property within 3 years of your move.
The second, is bridging finance. This involves offering both properties as security for a short term that could last up to 12 months with a view to repaying it once your current home has sold. In your case, I don't think this would be feasible because there is unlikely to be enough equity across both properties to cover all costs mentioned, furnishing requirements and the additional costs associated with this type of finance. That said, if you can consider holding off on some of the furnishing costs, it may be possible and although a costly route compared to the alternative, it will almost certainly be the quickest. To look at what option is best for you it's always best to speak to a mortgage adviser, they will be able to get more information from you and help recommend a solution that's right for you.
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