Temporarily Owning 2 Houses - Is This a Bad Idea?

[astrid]

After lurking on this forum for many years and looking at houses forever I've finally compromised and am in the process of buying a new house that although not ideal is much less bad than the other dross out there. The problem is I will be completing on the new house before I can get my current one on the market as it needs a little work. I plan to move into the new house, move all furniture out of the old one and then when I have the space, start redecorating prior to sale.

How bad an idea is this? It will lead to owning two houses at once. Am I mad? Am I exposing myself to potentially losing double when the inevitable crash occurs? The timing of course couldn't be worse with Brexit on the horizon and Coronavirus  threatening to seriously effect the economy. Alternatively the BOE could just respond by manipulating the market by printing money and lowering interest rates in the hope that they can buy time and avoid the inevitable.

[Uchimata]

Hi, I did something similar around 10 years ago. The terrace house I was selling turned out to have a water saturated ground floor due to an undiscovered burst radiator, so I had to wait until that was fixed and dried out until I could sell. 

I did get it sold though, it was a stressful time, but this was due to the market being down and a lack of buyers.

If you can cover both mortgages for 6 months you should be okay.

[Kosmin]

Try to think about what would happen in different scenarios.

How long do you think it will take you to do the work on the house? How much do you think it will cost? How long do you think it will sell? What do you think it would sell for?

Then what if you estimates turn out to be wrong? If it takes a long time to sell, or offers are a lot less than you expected, would you rent it out? 

[satsuma]

You need to be careful about stamp duty on the second home, this would need to be paid at the new higher rate if you can’t sell the housemor decide to rent it.  Also think about the cost of running two houses and insurance which may not be valid if the house is empty,   

[astrid]

The work should take about 6 weeks and cost about 5k and according to reports my house should sell quickly as it's a semi detached house in a convenient location. My biggest fear is a sharp fall in house prices due to the market being totally spooked by all that is going on. I have already agreed and fixed the price of the house i am going to buy and therefore i will lose badly if things go down! How likely do we think that Brexit and Coronavirus or whatever else (oil prices, trade wars, actual wars) will cause a fall in prices here within the next 6 months?

[satsuma]

Can’t see prices in NI falling that much,  prices are not that high to start with.  

[2buyornot2buy]

Can't see much conveyancing going on over the next 3 months to be honest. I expect transaction levels to fall off a cliff during April. 

[satsuma]

I actually was looking at a second house to rent but not sure I will go ahead, there are a lot of rentals and lots of hassle and tax.  It would need to be very well priced to make me take on a second property.  If I was u I would get rid ASAP.  

[2buyornot2buy]

12 hours ago, satsuma said:

I actually was looking at a second house to rent but not sure I will go ahead, there are a lot of rentals and lots of hassle and tax.  It would need to be very well priced to make me take on a second property.  If I was u I would get rid ASAP.  

For higher and additional rate tax payers mortgaged BTL just doesn't add up anymore. Particularly in NI where the vast majority of LL pay the rates. 

My area is very much back in the cheaper to rent than buy territory. Even with .25% interest rates. 

[astrid]

Seriously thinking of backing out of my house purchase, I can't see any way I can get a quick sale on a house under current circumstances and god only knows what the long term effects will be. Last thing i want is to time this badly and lose on the sell side of the equation, I don't need to move I can just sit tight wait until the dust clears and then try again, maybe by then prices will be cheaper. I will still win as I'm moving to a more expensive house.

[2buyornot2buy]

5 minutes ago, astrid said:

Seriously thinking of backing out of my house purchase, I can't see any way I can get a quick sale on a house under current circumstances and god only knows what the long term effects will be. Last thing i want is to time this badly and lose on the sell side of the equation, I don't need to move I can just sit tight wait until the dust clears and then try again, maybe by then prices will be cheaper. I will still win as I'm moving to a more expensive house.

To be fair, you could probably get the work on your own house done very quickly. Get the finger out, get you house listed and see how quickly it sells. 

[2buyornot2buy]

Looks like Ireland is in a mini shutdown. We'll follow in a few hours/days. I can see transaction levels falling to near zero in a couple of months. 

[astrid]

You sound like my partner, he never stops saying that! At least with the lock down I can use some of the time on home improvements. I think I may have missed the boat on this in terms of selling. I could make the purchase of the new house dependent upon the sale of the current one in the sales contract, this would massively piss off the seller but he has to accept these are very unusual circumstances!

[2buyornot2buy]

On 12/03/2020 at 11:37, astrid said:

You sound like my partner, he never stops saying that! At least with the lock down I can use some of the time on home improvements. I think I may have missed the boat on this in terms of selling. I could make the purchase of the new house dependent upon the sale of the current one in the sales contract, this would massively piss off the seller but he has to accept these are very unusual circumstances!

I personally think I'd pull out of the purchase now. 

[satsuma]

I would not be buying now unless they will knock off at least 10percent.  

[2buyornot2buy]

Isn't an issue now. All completions have been put on hold now. There will be a complete collapse in transactions now. 

If you haven't exchanged, you've probably dodged a bullet. If you have exchanged I expect some legislation soon to address this. 

 

I see Barclays have withdrawn all products with >60% LTV. 

 

Edited March 25, 2020 by 2buyornot2buy

[nigooner]

1 hour ago, 2buyornot2buy said:

Isn't an issue now. All completions have been put on hold now. There will be a complete collapse in transactions now. 

If you haven't exchanged, you've probably dodged a bullet. If you have exchanged I expect some legislation soon to address this. 

 

I see Barclays have withdrawn all products with >60% LTV. 

 

Where was this announced?

 

edit- transactions stopping, not Barclays mortgages 

Edited March 25, 2020 by nigooner

[Belfast Boy]

I nearly owned 2 houses in spring of 2007.

The bank mortgage advisor told me to lie about my income to get the size of bridging loan needed, until my house sold.

Luckily, I set a limit and was out bid on the property I wanted. That saved me from myself and a massive liar loan, with payments bigger than my entire salary.

With current market uncertainty, I think it would be sensible NOT owning 2 houses.

 

[2buyornot2buy]

11 hours ago, nigooner said:

Where was this announced?

 

edit- transactions stopping, not Barclays mortgages 

Not sure it has been announced. Solicitors have been advised to delay completion indefinitely. Banks have been withdrawing mortgage offers. Some at the very last minute. 

[djw]

https://www.mortgagestrategy.co.uk/news/halifax-withdraws-all-mortgages-over-60-ltv/
 

 

[nigooner]

13 hours ago, 2buyornot2buy said:

Not sure it has been announced. Solicitors have been advised to delay completion indefinitely. Banks have been withdrawing mortgage offers. Some at the very last minute. 

I saw an article about it in Scotland but hadn’t heard of anywhere else. Not sure why it needs to happen, surely it can all be done using technology rather than needing solicitors to physically sign/witness things and hand deliver etc. 
aspects like surveys obviously need done in person, but I can’t see any real benefits to justify stopping every property transaction for a set period. 

[2buyornot2buy]

10 hours ago, nigooner said:

I saw an article about it in Scotland but hadn’t heard of anywhere else. Not sure why it needs to happen, surely it can all be done using technology rather than needing solicitors to physically sign/witness things and hand deliver etc. 
aspects like surveys obviously need done in person, but I can’t see any real benefits to justify stopping every property transaction for a set period. 

Large parts can be taken care of electronically, though not all. Obviously with a transaction this size you can't afford to miss anything. 

There are other issues. Banks are moving staff from mortgage departments and underwriting to deal with the truly massive number of struggling businesses. They need the staff deployed elsewhere. 

There's also liability issues. Banks are withdrawing funding offers, literally at the last minute. To avoid any potential litigation solicitors have been told to stop. 

[astrid]

We pulled out about 2 weeks ago, only got to the sale agreed stage on the property we were to buy. So no real financial damage other than paying a mortgage advisor to arrange a mortgage we most likely will not be taking out. This is probably all for the best, I now have time to fix up my current gaff and when the lock down ends (hopefully it will) the housing market will look more realistic. In any case as we are hoping to move to a bigger more expensive house the fall in values will mean we have less to put in on top of what we get for selling our own. This all presumes there is a working housing market in 6 months time, we may see very few transactions. I assume house prices will go down significantly, i'd love to know your estimates of by % how much?

 

[2buyornot2buy]

4 minutes ago, astrid said:

We pulled out about 2 weeks ago, only got to the sale agreed stage on the property we were to buy. So no real financial damage other than paying a mortgage advisor to arrange a mortgage we most likely will not be taking out. This is probably all for the best, I now have time to fix up my current gaff and when the lock down ends (hopefully it will) the housing market will look more realistic. In any case as we are hoping to move to a bigger more expensive house the fall in values will mean we have less to put in on top of what we get for selling our own. This all presumes there is a working housing market in 6 months time, we may see very few transactions. I assume house prices will go down significantly, i'd love to know your estimates of by % how much?

 

No idea. But as I said, sticking my neck out and saying 30%. Back to the lows of the crash. Could be more or less. Repossessions would be as large this time round. Looks like the government is printing until they run out of ink. But I expect hyperinflation down the line. Lots of zombie companies will go bust. 

[djw]

For what’s it worth I’ll guess 20%.
i think a combo of pent up demand (people need to buy/sell) cheap debt and fear of cash disappearing via inflation or bank bail ins will keep prices from collapsing completely.

we haven’t had a 2006 style spike so not as far to fall this time round.