Getting a mortgage when the deposit is tied up in current property?

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Butterflygirl83

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Trying to sort out a mortgage application at the moment for a new house. I will be a second time buyer. House has been valued and I hope to have 70k+ profit left over once we pay off my current mortgage. The property I want to buy is 205k and I am looking for a mortgage of 135k. But the banks I have approached wants me to sell this house first before applying for the new mortgage as I don't have the cash deposit required. Is there any way around this? I don't really want to sell up with no security of actually getting the new mortgage! It all seems a bit nuts.

Thanks.
 
UB have some mover mortgage options but the consensus in the current market is to sell, then buy, at least on the sell side as far as the exchange of signed contracts.
Its not as nuts as having an extra 205k + in debt and pressure to sell if you can't service both loans
 
Yes but I'm trying to avoid having to sell first, then having to find somewhere to rent in the mean time while organising the new mortgage. With a young family its not ideal. I was hoping there would be a simpler solution.
 
I never thought of this. I'm in the same situation, buying a 2nd family home and selling. I am meeting a mortgage advisor tomorrow and will ask him! I presumed that the bank would consider the sale of the house as some sort of collateral and would wait for the sale to complete, hopefully it's not a case where a bridging loan would be required.
 
Unfortunately timing is the main thing with this. Assuming you are approved for the new mortgage then there would probably be a condition on it that you had a signed contract for sale of your existing property before drawdown of new mortgage.

Obviously this can be hard to get right and bridging was usually used to bridge that gap if there was one but open ended bridging such as one would need if there was no agreed sale on the original is just not done anymore because of course you could end up with two mortgages and a property that was not selling.
 
GenerationXer said:
I never thought of this. I'm in the same situation, buying a 2nd family home and selling. I am meeting a mortgage advisor tomorrow and will ask him! I presumed that the bank would consider the sale of the house as some sort of collateral and would wait for the sale to complete, hopefully it's not a case where a bridging loan would be required.
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Would you mind letting me know how you get on tomorrow with the mortgage advisor pleasd. It's such a tricky one. They don't do bridging loans anymore which is what we essentially need. So silly considering we will be 70k in profit and the mortgage we need is less than the one we have now! They certainly aren't helping 2nd time buyers out at all.

Thanks.
 
From the Banks perspective, you are not 70k in profit. And until you actually have that money in your account you are not 70k in profit. The days where you could sell a house on a Thursday and move into the new house on the Friday are long gone. Your only option is to sell, rent and then buy. I know it is a major pain with young kids but that's just the way it is. Unless you find a buyer for your house who will pay you the money and then rent the house back to you until you move into the new house...a long shot unless you are selling to an investor maybe.
Even if you got bridging finance, or a loan from someone else, there is no guarantee the sale of your existing house will go through as planned, anything can happen during the sale of a house.
 
Butterflygirl83 said:
Trying to sort out a mortgage application at the moment for a new house. I will be a second time buyer. House has been valued and I hope to have 70k+ profit left over once we pay off my current mortgage. The property I want to buy is 205k and I am looking for a mortgage of 135k. But the banks I have approached wants me to sell this house first before applying for the new mortgage as I don't have the cash deposit required. Is there any way around this? I don't really want to sell up with no security of actually getting the new mortgage! It all seems a bit nuts.

Thanks.
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There certainly are banks out there that will give you approval in principle before you sell your house. The redemption of your current mortgage and the deposit that the sale would raise would be standard conditions on the approval in principal. In order to move to loan offer, you will need to have unconditional contracts signed for the sale of your house. The problem is, your sale could be delayed or could fall through, in which case you would be badly stuck. Bridging is available only on a very limited basis, and only when the bank is satisfied that you can support your current and new mortgages on an ongoing basis (again, in case your sale falls through). In practice, it is not an option in your case, as you need the proceeds of your sale for the deposit.

It's difficult of trying to move straight from your house to the new one, but you'll just have to try to get the timing right, or look at renting for a period. As sadie said, you could try to rent your own house for a while before you move into the new house, or you could try to agree to a relatively long closing period, to enable you to move straight into the new house. Either way, the starting point is putting your house on the market, after receiving approval in principal.

Best Regards,
Dave Curry, Irish Mortgage Corporation
https://ie.linkedin.com/in/davecurryirl
 
It's pretty ridiculous though. Things like 90% LTVs and bridging finance were plain vanilla before the Celtic Tiger era and we had no problems.

Like a lot of things in Ireland, we went too far one way in the run up to the financial crisis. Now things have gone too far the other way.
 
Gordon Gekko said:
It's pretty ridiculous though. Things like 90% LTVs and bridging finance were plain vanilla before the Celtic Tiger era and we had no problems.

Like a lot of things in Ireland, we went too far one way in the run up to the financial crisis. Now things have gone too far the other way.
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You would agree that property prices have gone very much up, very quickly in the last couple of years. Reminds me of the celtic tiger actually. Not as bad.
 
Bronte said:
You would agree that property prices have gone very much up, very quickly in the last couple of years. Reminds me of the celtic tiger actually. Not as bad.
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No, because they were coming from a ridiculously low base. In 2006, prices were ludicrous. Now, they are not. In 2006, there was a credit bubble. Now, there's only a trickle of credit.
 
Hi Butterflygirl! Responses above are quite correct in terms of selling your own property first. Sales process in the current market is far slower than it was in the Celtic Tiger years. This is due to solicitors ensuring that all due diligence requirements are completed prior to funds changing hands. Even a contracted sale is no guarantee that it will progress to conclusion as title issues may arise to delay or even preclude the sale progressing at all.
You will need to sell your existing property first before you can consider purchasing a new property. This may well involve renting for a short period. Dave Curry mentions bridging finance but in my own experience I have seen no willingness from banks to provide same due to the risks involved if a sale falls through. However an approval in principle should give you some flexibility as to what level of finance you may have available to purchase a new property.
 
The mortgage advisor said that you can either close both sales in the same day (sell in the morning and buy in the afternoon) or make an agreement with the bank to defer paying the 20% up front and tie it to the equity to be paid when the sale closes. Bridging loans aren't really done anymore and would be expensive anyway. If the bank can see that a sale is going through and it's just a case of timing then there should be no issue. This makes sense as I'd say many people are in the same situation, especially since the new rules came in. Looks like there's nothing to worry about as long as the sale is in progress at the time of drawing down the mortgage :)
 
But deferring the 20%, how does this work? Won't the solicitor want that on the day the sale closes on the new property to make up the purchase amount together with the mortgage drawdown. If the original deal is not gone through at that stage where does the 20% to finalise the purchase come from?
 
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