Buying a new house before selling your current one can be a complex and challenging process, especially in the fast-paced UK property market. However, with careful planning, it can be done successfully. This article outlines key steps to help you to buy a house before selling yours.
Understand the market
The first step is to understand the current housing market. Are you in a buyer’s or seller’s market? A buyer’s market occurs when there are more homes for sale than there are buyers, while a seller’s market is the opposite. In a seller’s market, homes can sell quickly, making it easier to buy before selling. However, in a buyer’s market, it might take longer to sell, requiring more planning.
Assess your finances
Evaluate your financial situation to determine if you can afford to buy a new house before selling your existing one. This will involve determining your equity (the value of your home minus any mortgage or other liens on the property), your potential new mortgage payments, and your ability to maintain two properties if your existing home doesn’t sell quickly.
Prepare your property for sale
While searching for a new home, it’s essential to prepare your current property for sale. Declutter, make necessary repairs, and enhance your home’s curb appeal to attract potential buyers. You may also consider hiring a professional home stager to help make your property more appealing to buyers.
Speak with a mortgage advisor
Consulting with a mortgage advisor can help you understand the available options. One possible solution could be a bridge loan, which is a short-term loan that covers the interval between buying a new house and selling the current one. The loan is generally for a term of 6 months to a year and is paid off when the current home sells.
Get a Mortgage in Principle
A mortgage in principle (MIP) or decision in principle (DIP) is a statement from a lender saying how much they would, in principle, lend you. This is not a formal mortgage offer, but it can make you a more attractive buyer because it shows sellers that you can afford to buy their property.
Choose your new home and make an offer.
Once your finances are sorted, start house hunting. When you find a house you like, make an offer. It’s a good idea to mention that you have a house to sell. Some sellers may not be willing to wait for you to sell your house, especially in a seller’s market.
Chain-free buying services
If you’re having trouble finding a buyer for your home, you might consider a chain-free buying service. These companies buy your home so you can purchase a new one without waiting. The trade-off is that you might get less than the market value for your home, but the process is typically much faster and more predictable.
If your house doesn’t sell before you close on your new home, you might consider renting out your old house to cover the mortgage costs until it sells. Keep in mind that being a landlord comes with its own responsibilities and potential challenges.
Consider a bridging loan
A bridging loan is a short-term financing solution that can help bridge the gap between the sale of your existing property and the purchase of a new one. Although interest rates on bridging loans can be higher than traditional mortgages, they can provide flexibility and allow you to secure your dream home before selling your current one. Consult a financial advisor to determine if a bridging loan is a suitable option for you.
Coordinate the sale and purchase processes
Work closely with your estate agent, solicitor, and mortgage advisor to coordinate the sale of your existing property and the purchase of your new one. Ensuring a seamless transition between the two transactions is vital to minimising potential complications.
Plan for contingencies
Unexpected events can occur during the property buying and selling process. Be prepared for potential delays and consider including a contingency plan in your purchase offer, such as a flexible completion date or a break clause, to protect yourself if the sale of your current home falls through.
In summary, buying a house before selling yours in the UK can seem like a daunting task, but with careful planning and professional advice, it’s certainly possible. Evaluate your financial situation, understand your options, and seek expert advice to navigate this process successfully. Remember, every situation is unique, so tailor these steps to suit your circumstances and make the transition as smooth as possible.