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When you are selling and buying a house at the same time in the UK, property chains can get tangled and messy. There are a number of steps you can take to ensure your house move is as simple and as stress-free as possible.
Read on to find out more, and also discover how to minimise the cost of buying and selling a house together.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Selling and buying a home at the same time
Providing all the offers in your chain go through, you can sell and buy property at the same time, and you won’t have to worry about arranging temporary accommodation while waiting for your house purchase to go through.
When selling and buying a home at the same time, your solicitors will align things so that the completion for both properties happens on the same day, meaning you can pick up the keys and move into your new home as your buyers move into theirs.
However, the process isn’t always as straightforward as this, and being in a housing chain can cause complications and delays when you’re trying to buy and sell a house simultaneously.
How do housing chains work?
A property chain develops when buyers and sellers are dependent on another transaction happening – whether that’s a purchase or a sale.
Imagine you had your offer accepted for the Smiths’ family home, but they are struggling to finalise their offer for the Dawkin’s home. This would mean the Smiths can no longer move, and you can’t move until they move.
Chains can be broken by any number of different buyers and sellers at different points on the chain. The longer the chain becomes, the more fraught your move can become.
It’s not unusual to be stuck in a chain for around six to 12 months. Even if everything goes smoothly, from the point of having your offer accepted on a new property, it tends to take six to 12 weeks to actually move in. So just two parties needing to complete this process in a chain can easily put you up at 24 weeks or six months.
There are ways that you can shorten the chain you’ll be in. So read on to find out our top tips to selling and buying a property at the same time.
How does a mortgage work when selling and buying a house?
If you still have an outstanding balance on your mortgage when looking to move home, you can still sell as long as your sale price is greater than the amount left on your mortgage or, if you have ended up in a negative equity situation, you have the funds to make up the difference – don’t forget to factor in early repayment fees.
In many cases you should be able to transfer your existing mortgage to your new home with the same terms. This is called porting a mortgage and it saves you from the hassle of having to arrange a brand new mortgage, although you will still need to reapply to the lender to get this deal.
However, assess your options carefully before porting your mortgage, as you may be able to find a better deal with a new mortgage and lender. Especially if you’re moving to a more expensive property, porting a mortgage may not always be the easiest and most cost-effective option.
When you sell your home, the buyer’s payment will be used to pay your mortgage lender. Anything in excess of your mortgage value will be your profit and can be used to increase the equity you own in the property you are buying.
Remember, the property you buy will need to be valued by your lender, so you will have to pay a valuation fee.
» MORE: See current mortgage rates
Tips for selling and buying a home at the same time
1. Get a valuation
First of all, you should get a valuation on your current property. This will help you list it at a realistic price for the current market in order for you to maximise your investment and sell your home in a timely manner.
To get an accurate price, start by getting an online valuation which you can then compare with those offered by local estate agents. It’s best to ask for valuations from a number of estate agents, so you can get an indication of the true market value of your property.
By getting a number of valuations, you can see which valuations might be too low or high for your property. Some agents will try to win your business by overvaluing your house, which they then might subsequently fail to sell; be wary of this when talking to estate agents.
You could also research the sold prices for similar homes in your area to get a better idea of the value of comparable properties in your area. What properties list for versus what they sell for can be quite revealing!
Estate agents will use their local knowledge to assess your home’s value, this is why it’s always a good idea to use local agents where possible.
» MORE: See latest house prices
2. Work out the equity in your home
A key piece in the puzzle of working out how much you can afford to spend lies in the equity you have in your current property. Home equity is the amount of your property you actually own, and can be worked out by finding the difference between the current market value of your property and the amount you still owe the mortgage lender. So, if your property is worth £250,000 and you have £125,00 left to pay on your mortgage, you will have £125,000 in equity.
If exchanging on your property and a new house purchase you can use the equity in your current property towards the deposit on your new property.
3. Work out your finances
When you understand your financial circumstances, including the equity in your home, you’ll be better placed when applying for mortgages, remortgaging or porting your mortgage, as you will know how much you can afford with a mortgage.
When there’s a gap between the equity in your home and the level of deposit needed to buy the new property you’ve identified, you may need to find more funds to cover the deposit. This is more likely to happen if you move to a more expensive property.
When moving home you’ll still need to understand your affordability as if you were a first-time buyer, especially if you’re upsizing and will need to pay higher monthly repayments.
Bear in mind stamp duty costs, which can be significant. You will need to account for these costs in your overall budget to move. You could cover these costs from savings, or if there is adequate equity from your house sale. Another option would be to add the cost to your mortgage, however by doing this you will be paying more in the long term.
» MORE: Stamp duty calculator
4. Speak to a mortgage adviser
Getting mortgage advice from a mortgage adviser can help you find a solution fitting to your financial circumstances. Whether you need to remortgage or port your mortgage, a broker will be able to discuss your options with you and will have a greater understanding of the long term considerations for your personal circumstances.
After speaking with an advisor you can compare mortgage deals more confidently.
5. Start your property search
Contact your local estate agents and search through online portals to find your ideal new home. But, before you put an offer in, you will be in a much stronger position if you can have a buyer lined up for your property.
When looking for an estate agent to sell your home, you will want to find the best agent for the job. Do extensive online research on the performance of each agent to determine their track record in selling homes like yours in the community.
Remember you could choose to sell your home through online estate agents.
6. Find your dream home
Now for the exciting part. Find your dream home and appoint a solicitor to manage the sale on your behalf.
7. Communicate openly
When you’re in a chain the process of completion can become pretty complicated. It’s worth communicating regularly with the other parties involved in the chain as well as the conveyancer, this way you can stay aware of any changes and take any action required promptly to help every link in the chain to progress.
8. Complete
Now set a completion date. You’ll agree to this with your solicitor, and then you can exchange contracts.
The completion date is when funds are transferred and the keys are handed over to the buyer. Make sure you set a completion date that works for everyone- you will arrange this with the help of your solicitor – and don’t forget you may need to compromise to keep things moving along.
Start today and begin your journey to moving to a new home.
» MORE: Best mortgage lenders
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