How can we buy our dream home without selling up?

admin
9 November 2015

Q

Next May when I retire, my husband and I plan to sell our home in London and relocate to Scotland. We own our home outright, and it is worth around £370,000.The problem is we have just seen our dream home for sale in Scotland for £250,000. Is there any way we can raise the cash against our current home to buy the Scottish property? Or is there another way we can buy it?
From
SL/London

A

People remortgage their current home for any number of reasons. Doing so to raise capital for the purchase of a second home is certainly something that lenders will consider.

Some will limit the maximum proportion of the property value that they will lend to raise funds but you have plenty of equity and raising the full purchase price would amount to less than 70% of the property value. However, they may be less keen to lend if you plan to repay the borrowing within a year, effectively using the mortgage as a bridging facility and many deals will lock you in.

If you have funds available for a deposit, then it may be possible to raise a mortgage directly on the Scottish property as a second home.

In either case, lenders will need to assess that the borrowing will be affordable.That will take account of income and expenditure but also how affordable the mortgage will be once you retire. Lenders can lend beyond retirement age as long as there is adequate, demonstrable income to support the loan. However, most impose a maximum lending age of between 70 and 75, meaning you will need to repay the mortgage in full by then.

This can limit the maximum term available, which could in turn affect the monthly payments and affordability.There are some lenders that can be more forgiving on the maximum age though, so it makes sense to seek advice if this is an approach you want to take.

Short-term finance or bridging finance may be an alternative option but rates will be higher than are available on standard mortgage lending. There is also a risk that if it proves harder to sell your current home than you would hope, you may run out of time to repay the loan.

 

David Hollingworth is a mortgage broker at London & Country Mortgages in Bath.