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What to do if your purchase completes before you’ve sold your old home
You’ve found the home of your dreams, your offer has been accepted and now you’re close to completion. You should be feeling great, but unfortunately you’ve yet to sell your old home. So, should you go ahead and complete the purchase before you’ve sold your property?
Delay it if possible
The main problem you’re likely to face if you complete a purchase of a new house before you’ve sold your existing one is where you’ll get the money you need to pay for it. In most cases, you need to sell your property to get the money you need to pay off the mortgage, and whatever’s left over forms the deposit for your new home. If you haven’t sold your current property, how do you bridge this financial gap?
Depending on your circumstances, it may therefore be a good idea to hold off completing your purchase at this point. There are means available to help you afford your new home whilst you’re still the owner of your last one, but you should generally see these as a last resort. If you’ve had very little interest in your home, there’s no guarantee you’ll sell it anytime soon, so you might want to hold off buying altogether as it can be risky to jump the gun and buy a property without finding a seller for your old one.
However, if you really don’t want to pull out of the purchase of your new place, you could consider renting out your old house while you live in your new home. This could bring in a bit of extra income to offset some of the expenses you might have to pay to move out before you’ve agreed a sale. However, you’ll have to speak to your mortgage provider to get their permission first, and having tenants living there could complicate things when it finally does come to the point where you’re ready to sell your home.
On the other hand, if you have received a bit of interest from viewers or you’ve had an offer put in and you’re just waiting for the process to be finalised – which can sometimes take a few weeks –there is a way to get the finance you need to complete your home purchase before you’ve agreed the sale of your old house.
It may cost you more
Should you find yourself in the sticky situation of buying a home before you’ve sold your old one, you could consider a “bridging loan”. This type of loan effectively bridges the gap and lets you buy your new home while you wait for your old house to sell. You can then use the money from the sale of your old house to pay off the loan.
However, the fees attached to a bridging loan can be expensive and the interest rates are often quite high as they’re designed as a short-term solution. That’s why it’s best to only consider this route if you already have an interested buyer who has put in an offer or is just about to.
Don’t forget about Stamp Duty
If you do go ahead with the purchase of a new property before you’ve sold your current one, it’s also worth bearing in mind that under new Stamp Duty rules due to be implemented in April, anyone purchasing a second home will be subject to a higher rate of Land Tax. Because you’ll technically own two properties until your old one sells, you’ll have to pay the higher rates. You can apply for a refund, but you’ll still need to have the funds available to pay this higher tax when the purchase of your new home completes. You can find out more about the new rates and just how much you’ll have to pay here.
If you find yourself in a situation where you’ve bought a new home but you’re yet to sell your old one, it can sometimes get a little overwhelming. Remember, we’re here to help and offer advice when you need it – so please don’t hesitate to get in touch with us via Facebook or Twitter if you have any questions.