Posted on 12 October 2011 by Billy
My wife and I currently live in a 4 bedroom house worth approx £200k with a mortgage of £68k and have savings of around £25k.
We have recently found a 5 bedroom house on the market at £250k in an area we wanted to move to, but the owner is a company rather than a family and they are looking for a quick sale. They aren't willing to wait for us to put our house on the market.
I was wondering if there is anything we can do to secure the other property before selling our own house ? My salary is £41k
Could we change the mortgage on our existing house to buy-to-let, adding say £25k to it, to give us a £50k deposit for the new house, then pay both mortgages til ours is sold ? Are there other solutions open to us? Am I crazy to even consider this?
There is nothing wrong with what you are wanting to do, after all if everything works out you will end up with a mortgage of around £120k on a property worth £250k However, there are risks attached which need to be taken into account. Do you know the reason the vendors want a quick sale? Is it because they need an injection of cash to the business, is it because the property is not worth what they say or because there are problems with it that you do not know about? You can protect yourself by having a proper survey carried out, rather than relying on the valuation for mortgage purposes and your Solicitor should be able to find out if their is anything else detrimental about the property or the area it is in. The other main risk is what happens if you can't sell your property within a reasonable period and you are left with two mortgages and very high monthly outgoings?
The BTL option you have mentioned is one way of achieving your goal and the amount you can raise to put down as a deposit will depend on the anticipated rental income. You should ask at least 3 local ARLA registered letting agents for their monthly rental assessment and once you have these we can work out how much you can borrow.
The other way of raising the money to take out a short term bridging loan. These are normally secured on either your existing property, the new property or a combination of the two and effectively release the equity that you would normally have available from a sale. They are paid off on the sale of your existing property and can prove to be expensive if a sale is not forthcoming.
I believe we can help you decide how to proceed and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to advise you on your situation.
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.