Originally Posted by maxsmum
Hey, we have mortgage approval and 20% deposit to move house (from an inheritance), but have our current home to sell. We ideally want to use our mortgage approval to buy the next house and then put our current one on the market, leaving us a comfortable couple of months to move in and do any works on new house first without being left homeless.
We could afford the 2 mortgages for a few months.
Will the bank let us do this? (I know I need to ask them but wondering if anyone else has done it).
I'm way too terrified to put our house on the market and then scramble around trying to buy another one for fear of being homeless.
This would be an unorthodox way of going about this. You would usually go one of two ways. The most usual way is to get an offer on your existing home and use the proceeds of that, minus what you still owe, plus whatever funds you can arrange from the bank in the form of a mortgage and your savings, to make an offer on the second home. Example:
Value of home: 400,000 Euro
Existing mortgage: 300,000 Euro
Inheritance: 100,000 Euro
New mortgage: 300,000 Euro
Total funds available: 400-300+100+300 = 500,000 Euro
You could offer up to 500,000 Euro on the next property.
The trick there is that you would be in what's called a 'chain'. Solicitors and banks would be well used to dealing with this kind of situation so it won't put them off, however buyers can be put off as it can cause complications in the sale. Essentially everyone needs to go into binding contracts simultaneously and then working out completion can be tricky. Once you get to a certain price point though people become more accepting of 'the chain' as there will be fewer buyers out there with the funds available to buy outright.
The other option, which we took because of coming from a different country to return to Ireland is to just sell the existing house and find other accomodation in the interim. You won't be considered first time buyers, but you will not be in a chain either, which sellers like.
Your plan fits neither option and I think the bank will raise an eyebrow at it. You will effectively be purchasing a second property and the bank will lend on that basis. Much higher deposit required (40-50%?) and much stricter income guidelines - I believe many banks would be looking for total income of 100,000 plus to sanction such a mortgage.
It doesn't hurt to go around lenders and see if they'd be okay with this, but if you want my opinion I would say it's highly doubtful.