Options for financing move to a bigger house

B

Billy Baltic

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We are in the last couple of years of our current mortgage and would like to 'up grade' from current semi-d to a bigger house. While the house, like most, has lost a lot of value we currently have around 120k euro of equity at current valuation.
I know the sensible thing to do is sell and rent while looking for our next home but I'm curious if there are other options. For example, will a bank provide a larger mortgage for a new home on the basis that the sale of our current house will go straight into reducing the loan amount (thereby avoiding moving twice and having to rent)?
 
Hi Billy

It's a difficult dilemma.

The easiest way is to sell first.


  • It's the least risky
  • It puts you in the driving seat when dealing with sellers
The reality is that houses are difficult to sell. If you buy first, and your sale doesn't go through, you will be stuck with two mortgages. You won't want to rent your old house as you will want to sell it. You will be under real pressure so you will have to cut the price.


If you sell first

  • You will be under no pressure
  • You will know how much money you have to spend
  • You will be minimising the risk
  • Auctioneers selling the house you want to buy will treat your offers seriously and may well give them preference over higher offers from other people who are depending on closing the sale of their own property.
It's well worth the inconvenience of moving twice and having to rent.



You can try to schedule them to coincide, but in the current market it's very difficult. When you have accepted an offer on your current home, then you can start looking in earnest at making an offer on the home you want to buy.


If you are lucky you could time the sale and the purchase on the same day, but if the sale does not go through, you will not be able to complete the purchase.



You could also ask the buyer of your home, if they would allow you to rent for a little while after closing the sale. Most solicitors would advise their clients not to do that, but I don't really see why not. If it's an investor buying it, they would be happy to have a tenant. You could pay an above market rent to encourage them.
 
Thanks for your response Brendan. Its what I expected but hoped for something else. Is there no banking product which caters for this very common need? I may be wrong but was this not covered by bridging loans in the past?

Also, I have savings which I could use to clear the current mortgage. Would that change the situation in anyway in approaching the bank for funds?
 
I don't think that they do bridging loans anymore. In general, they were used where you had exchanged contracts on the sale of your house but you had to close the purchase of the new home first.

As the market is less predictable and as credit is tight, I don't think that they do them anymore. But you could check with your bank.

But even if they do, I think you are still better off reducing the risk and increasing your buying power by selling first.
 
Thanks Brendan. Maybe we need to reconsider our plans for a while. The stategy of sell, rent, buy is some effort for a couple of adults but i don't fancy it with 1.7 kids thrown into the mix also.
 
Billy Baltic said:
Thanks Brendan. Maybe we need to reconsider our plans for a while. The stategy of sell, rent, buy is some effort for a couple of adults but i don't fancy it with 1.7 kids thrown into the mix also.
Click to expand...

It sounds very awkward and it is, but buying / selling / moving is very stressful anyway. If you want or need to move, you will have to be up for it, whichever way you juggle it.

Open-ended bridging ( which is the loan you want) used to be available, in limited circumstances, but as Brendan has pointed out, it isn't anymore and I cant see it coming back for a long time. You shouldn't make your life plans based on waiting for banks to re-instruce it.

Do you have friends of relatives that you can stay with if there is a gap between buying and selling ?

I got an open ended bridging loan once and it was very stressful in itself. We bought a house, and got a bridging loan while we sold our own. The sale of our own house fell through and we had to put it back on the market. We were covering three mortgages every month ( The old mortgage, the new mortgage and the bridging loan). We ended up taking a much lower offer for our house because we needed to get out of the situation.

you do need to think through your stategy and be realistic about the price you will get and how long it will take to sell yours in order to be able to plan the move, but if you need a bigger house, it'll all be done soon and you'll look back and laugh.
 
Sell rent buy

Hi Billy

We sold our house last year and have been renting since. We had two small children, the youngest was 6 months when we moved. I wouldn't call it easy but it was doable.

Its a big change to be renting when you have had your own place. We are actively looking for a house to buy, but it is taking a while as we are being fussy (we want this move to be our last one). However, if you rent in the place that you think you want to buy, it can work as a good test, and you get a feel for the area.

I'm not sure where you are based. We are in South Dublin and found it quite hard to find a decent unfurnished house to rent. The market doesn't seem to be aimed at families.

Best of luck with your decision......
 
We are looking to buy in the same area as we currently live so have no concerns from that perspective.

Carmel, I'm interested in your experience. Did you talk to banks before selling to see how much you are likely to be approved for? If so has that changed over the duration you have been renting? Apart from the work involved in selling, renting and buying I'm a little concerned of being caught by the changing policies (if they even exist) toward mortgage approval.
 
Mortgage approval

Hi Billy

Yes, before we put the house up for sale we went to BOI to check what they would approve us for. The figure that they initially came up with was huge, there was no way that we would have wanted to borrow that much, especially taking our childcare costs into account. They told us that in order to get 'proper' approval we would have to make a full application using a real property. We picked a property from myhome.ie, picked a price for it and asked for a loan of what we thought we wanted to borrow. We just went back to them recently to see if we can borrow an extra 20K over that and are waiting for a decision at the moment.

Brendan has asked me to do a diary of our experiences so far trading up, so I'm going to do that now. Please don't hesitate to come back with any further queries.
 
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