How to finance this purchase?

M

MissRibena

Guest
Hi everyone

Am trying to get it clear in my head what my options are and what the consequences of each would be. Any help would be great.

Goal: To buy the house I have falline love with and be debt-free.

Problem: My house is only just on the market and may not sell quickly (it had been on the market for ages when I bought it 5 years ago). This house is valued at €230,000 by auctioneer but I would be happy enough with anything exceeding €200,000. There is €59,000 left on the mortgage.
The new house is €150,000. Stamp duty is €4,500. Estate Agent €6,000 approx. Solicitor €2900.
So breakeven is €222,400.

I will need to borrow for the deposit of €15,000 as all my savings are in SSIA and use proceeds of the sale to pay this back asap. I was thinking that (depending on rate etc) that if I don't get the breakeven price for my house, and the shortfall is less than say €10,000, to use this loan as a "mortgage". It could be easier and more cost effective (solicitor and stamp duty wise), or am I missing something?

What if my house doesn't sell quickly and there are no contracts signed on the new house (thus ruling out bridging finance)? I could roll the €15,000 into a new mortgage on the new house but I don't fancy having two mortgage and the huge repayments (even if the bank would approve it). How about an endownment mortgage? Am I right in thinking that I would only have to repay interest and then a lump sum? Can you get these on a temporary/variable basis?

Are there any other options available to me?

Thanks in advance
Rebecca
 
Rebecca,

A €230k valuation on your existing house would support a 92% mortgage of €211,600. If your income could stretch to that, then remortgaging your current house would enable you to buy the new house and wait, if that proves necessary, for the right price on your sale. Of course there would be some cost involved in remortgaging but it would mean no bridging finance so a considerable saving there.

This does provide a constraint on your financing when you make your sale. If you don't achieve a price that would clear your mortgage you'd have to take out a personal loan or mortgage your new property to redeem the mortgage in full. I know from previous posts that your objective in life is to be mortgage-free so a personal loan is your obvious choice. Of course repaying that will provide a short-term burden at a time (i.e. moving into a new house) when it's nice to have a bit of spare cash.

What flexibility do you have with regard to stalling your purchase until you've made your sale? Often buyers assume sellers are in a mad hurry to get out when they might welcome some breathing space. Talk to the estate agent involved and discuss the matter with yolur solicitor - it's amazing how a solicitor can slow down a transaction when so instructed.
 
Finance

Thanks for that oysterman.

My plans have hit a bit of an iceberg. The Vendor has someone else with cash who wil buy now, so it looks like I'm out of the running unless I can find them and kill them. Boohoo.

I'm going to leave my house on the market though cos I quite fancy the whole moving idea now.

Rebecca
 
That's the smart thing to do, of course.

Sell now, buy later puts you into a much stronger position and none of those "Will my house sell before my vendor starts trying to enforce the contract I signed more in hope than in expectation?" sleepless nights....

Good luck.
 
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