Avoiding a chain?

Gregor Samsa

Looking to move up to a bigger house. With what we’ve paid off on our current mortgage, we’d have about €100k equity in a sale. We’ve a good chunk of savings in cash (about a third of the price of the house we’re interested in). Based on joint wages, we’ll get approval for way more than we need to buy the house.

So - my fear is that waiting to sell our current house will be detrimental to buying the new one. We could, however, afford to buy it without the equity from the current house - not something I’d want to do over the full term of the mortgage, but it would be fine for a limited period (let’s say a year).

Is there anything to be said for drawing down a larger amount to buy the new house with just our savings and the mortgage, then selling the current one, and then putting the proceeds from the sale into paying off against the new mortgage (thus reducing our monthly payments)? Obviously there’s a risk that the sale of the current house would be delayed or not happen for some reason, which could leave us stuck with higher repayments on the new house. And we’d still be paying the mortgage (which is quite low) on the current house pending the sale (but again, that is technically affordable).

But is this a thing that people can/would do? I’m just trying to explore all the options, so I’d appreciate knowing if this could work, be a disaster, or just a total non runner. We’ve no interest in keeping the current house as an investment or anything. This is purely about the timing of the sale - before or after buying the new house.

(Wasn’t sure if this should be marked Buying or Selling, so left it at other).

DubLad69

As far as I know most countries have mortgages specifically for this situation, but we don't in Ireland.

The mostly issue that you will face here is that the bank might not approve a second mortgage. Unless you can clearly afford to keep both in the long term.

Claw Hammer

Gregor Samsa wrote: »

But is this a thing that people can/would do? I’m just trying to explore all the options, so I’d appreciate knowing if this could work, be a disaster, or just a total non runner. We’ve no interest in keeping the current house as an investment or anything. This is purely about the timing of the sale - before or after buying the new house.

(Wasn’t sure if this should be marked Buying or Selling, so left it at other).

In general, in a rising market, buy first and then sell the old house. In a falling market, sell firts then buy a new house.
The danger is if there is a switch in the market during the changeover. many people were caught in 2007-2008 with 2 mortgages. Many people were stuck with no house at all in 2014.
The only risk in your case is that you will get less for your own house when you sell and have a higher mortgage afterwards. The upside is that you might get more for you own house as the market continues to rise after you buy which will ultimately leave you with a smaller mortgage.
You have to call the market and then take your chances!

enrique66_35

One bit of advice/thing to watch for if you can go down that road - make it clear to the bank at the outset of your intention to retain your old house for a period as they will otherwise inevitably put a clause in the loan offer stipulating a substantially unconditional contract for sale is held on the sale of your old house before allowing drawdown. That obviously makes the dual mortgage approach impossible.

I'm sure it can be done though if you have the financial means to pass the banks stress testing - good luck!

spaceHopper

If the sale to a while could you get caught for GCT

blackbox

spaceHopper wrote: »

If the sale to a while could you get caught for GCT

Only on the increase in value from when you move out, not from original purchase.