Posted on 7 February 2017 by John Parr
I own a small holding which has been paid for in full. I estimate its current value at well over £500000. We wish to down-size to a small period cottage for our later years of life. Our income is approx £24000, what would be the best way forward to raise funding to purchase a cottage if one came along that was the Right one? The price range for the cottage would be around £350000 could I use the current Property to pay for the Cottage?
I am unclear whether or not you are planning to sell your existing property and move into a smaller cottage or whether you want to purchase the cottage now with a view to moving into it later?
In either circumstance, you are going to need to release the equity in your existing property to make up the shortfall between the new residential mortgage, if any and the purchase price. If you are selling the property this will occur naturally, if not then the best way to arrange the finance will depend on how long you intend on staying where you are before moving.
It may be possible to arrange a short term bridging or secured loan, the rates and fees on these tend to be high but their short term nature means that the overall costs are not too onerous. If however, there is likely to be a considerable period between the two transactions then it may be cheaper to arrange a mortgage on your existing property for the full amount required.
I recommend that you speak to a good independent mortgage adviser about your situation. In addition to the usual income and expenditure information, they will need to know what your plans are, the size and use of your small holding and whether or not it has any planning restrictions attached to it.
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.
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