Timeline in case of existing property and desire to sell and build?

Hello,

we already own a paid-off (terraced) house. Now we want to build a bigger, detached house. For that, we need to buy a plot of land and of course build the house.

Question: How does something like this usually work in terms of timing (with regard to financing)? Selling the house now probably won’t work, as we don’t yet know when we could move into the new one? Not selling the house until completion is also not ideal, since the plot AND the house together is quite a sum of money, and you also need equity and cash for various non-financeable costs?

How does this usually work?

Thank you very much and best regards,

Marc

Take out a short-term loan based on the expected profit. Max. 2 years fixed interest rate, the interest should then be quite low, so the costs are manageable.

Alternatively, sell now and conclude a lease agreement with the buyer. Alternatively, directly reduce the purchase price by x months of cold rent.

Hello, there is a solution for that: bridging finance for the existing property. It is usually variable interest and can be repaid without prepayment penalties. Alternatively, a very short fixed interest period as Robson already said.

Hello Einmarc,

there are also other possibilities.

At the moment you are almost free of obligations, only paying the ongoing costs such as property transfer tax and maintenance of your house, so in all likelihood less than, for example, a tenant.

Then the question arises whether you even need the capital tied up in the terraced house for your new build – which ultimately depends on your salary and other income/expenses.

If you can finance your new house like most homeowners with free equity and your salary, then you can use the existing tied-up capital to increase creditworthiness (without a mortgage on the terraced house) – and after moving, sell your terraced house free of obligations and thus have this money available again in cash as equity. The repayment of the new build could then also be accelerated through special repayments.

Alternatives:

Keep the terraced house and rent it out, possibly using an additional mortgage for the new build, although due to the default risk I am not a fan of single rentals.

The right approach for you also depends on how the financing volume of the new build compares to your normal income/saving potential.

Regards
Dirk Grafe

We only started selling once we knew the approximate delivery date. Before that, we had a realistic cost estimate of our property done with the bank's broker where we finance. And we made it clear to the buyers in the brochure that it couldn't happen earlier and if it takes longer, a local customary cold rent was agreed upon. We even achieved 20% more than what went into the financing, don't let the buyer pressure you, you can decide who becomes the buyer.

Thank you all for the many replies. The option of selling after moving would of course be the nicest. And at the moment, you certainly don’t have to worry about not being able to sell the house. We bought about 10 years ago and accordingly, it will be a profitable deal either way.