Buying second home - how does it all work?

iwishihadaname

Bit of my backstory: Bought what I thought was my perfect house off plans in 2018. Moved in and immediately hated it. Basically overlooked just how noisy the road it faces onto would be. Put loads of money into soundproof windows and putting our own stamp on it before finally admitting to ourselves this place isn't working and it's time to cut our (significant) losses and go. (Moral of the story: don't buy off plans!)

So how does it work when buying/selling a home and financing? I rang AIB yesterday and they don't do bridging loans anymore. Do sellers accept clauses that an offer is contingent on the buyers own house being sold? Or is it just a case of me selling my home and renting for the interim until the purchase of the second home?

Would it be fair to say around 4% of the selling price of a house to be factored for solicitor and EA fees?

Thanks all.

muddle84

You can only borrow 3.5 times your combined salaries. So if you're combined salary was 100k and your existing mortgage is 150k, that means you could still borrow another 250k once you can prove you can comfortably pay both mortgages. If not, then that means you will have to sell the first house before buying a second.

We sold a house last year in Mayo and the solicitor charged 1.5% + Vat of the selling price and the solicitor costed €1200.

awec

You need to do the sums properly, as you are likely to lose a fortune doing this. In fact it may not even be possible.

1. You will need a 20% deposit for your new house.
2. Unless your house has increased in value since you bought it, or you bought it with a larger than usual deposit, you are not likely to have this 20% figure as equity in your current home if you sell after such a short time (assuming you are looking to buy a house of similar value).
3. If you used help to buy, you will be required to pay back your help to buy money to Revenue, pro-rata.
4. Solicitors fees, stamp duty etc will take another chunk.

So for example you bought for 500k in 2018. Let's say your house is still worth 500k. You had a mortgage of 450k (10% deposit). You've made repayments, and your outstanding mortgage is probably ~420/430k (first few years of mortgage is very heavy on interest).

You sell, and you bank the 80k. Assuming you used HTB, and assuming you got the full 20k, you owe revenue either 12k or 16k (depending on whether it's over 2 years or under). So in best case, you're down to ~68k cash. You can now buy a house worth max 340k, as you only have 68k deposit. This is ignoring the legal fees etc.

iwishihadaname

Thanks all. We do have the equivalent of a 40% deposit in equity. But just wasn't sure how it works without a bridging loan - sounds like I'd have to sell first and then buy after

muddle84

Having 40% is the most difficult bit. As long as your house is in a desirable area you will sell it easy enough. Don't let it get you down.

Samuel T. Cogley

iwishihadaname wrote: »

Thanks all. We do have the equivalent of a 40% deposit in equity. But just wasn't sure how it works without a bridging loan - sounds like I'd have to sell first and then buy after

You do but you can do that on the same day, it's called a chain. Happens everyday.

iwishihadaname

Samuel T. Cogley wrote: »

You do but you can do that on the same day, it's called a chain. Happens everyday.

OK that's good to know. Sorry I'm so ignorant of the whole process, it's good to know that can actually work. In my mind so many things need to line up at the same time I wasn't sure if it was a realistic thing.

Samuel T. Cogley

iwishihadaname wrote: »

OK that's good to know. Sorry I'm so ignorant of the whole process, it's good to know that can actually work. In my mind so many things need to line up at the same time I wasn't sure if it was a realistic thing.

Many things do need to line up, but they usually do. Bear in mind you wont be the only link in the chain.

awec

If you want to keep things a bit simpler you could prefer first time or cash buyers on your own sale, so at least you’d only be in a chain on one side of the process.

Vikings

muddle84 wrote: »

Having 40% is the most difficult bit. As long as your house is in a desirable area you will sell it easy enough. Don't let it get you down.

I'm going through this process right now and I'm sale agreed on both fronts. Everything, so far, has gone according to plan and without a hitch. Contracts are sent to our buyers and we're waiting for contracts from sellers. All valuations, surveys done etc.

You will need some money up front to work it but not a lot. Talk to a bank or broker and figure out how much you can borrow based in the estimated sale price of your house. Get approval in principal. On the lead up to this start window shopping and find some properties you like. Get AIP and view them all as quick as you can.

Engage an EA to sell your home. Be prepared for viewings to be thick and fast if you are listing your house for sale in the next few weeks. A seller will really want you to be sale agreed to accept an offer from you if there are other buyers looking at the property.

If you can find a first time buyer to buy from you this will remove one link from the chain. And if the sellers aren't buying it removes another.

In our case we accepted the offer on our home the same day our offer was accepted on the new place.

Also, engage a solicitor now and start paperwork with them. Solicitor can be requesting deeds and getting the ball rolling on your sale while the rest is in motion which will cut out some faff time when things are getting stressful.