What to do if your purchase completes before you've sold your home

The property world can be frustrating. Delays are common which sometimes means the timing of your sale doesn’t always go to plan. 

When you’re buying and selling at once, getting the timing right can be difficult. You might find the home of your dreams while you’re still waiting for an offer on your current home, or you might get an offer on your home before you've found another one. If the sale of your home doesn't coincide with the purchase of a new one, you could discover it's a costly situation or even results in losing out on your new one.

Consider the tax implications

If you go ahead and purchase a second home before your sale completes, you could be liable for capital gains tax, depending on how long your current home takes to sell.  You’ll also have to pay additional stamp duty as well.

Under current stamp duty laws, if you purchase a new home before selling your old one, you’ll be classed as owning a second home. Second homeowners have to pay a higher rate of stamp duty - 3% above the usual rate. Even if the current rate is 0% (as it is for homes under £500,00 until the end of June 2021), you’ll still have to pay 3%. If this happens, it could end up costing you thousands of pounds.

To get an idea of how much stamp duty you might have to pay, try using an online calculator.

You’ll be entitled to claim the overpayment back if your old home sells within three years, and you claim within a year of its sale or within a year of filing your stamp duty tax return. If you don’t have spare cash to cover this additional cost, what can you do?

Delay your purchase

You could try to delay the completion of your new property, but this might mean the current owners accept a different offer - and you lose out. If you've received an offer on your home and are close to finalising it, you might be able to delay proceedings for a short time. You'd need to speak to the other people in the chain to see if they'd be willing to wait a little longer. Sometimes, this can be difficult in a large chain.

If you've not had an offer on your current property yet, think about reducing the price to attract more offers - but only if you can afford to do so. You might convince the rest of the chain to wait another week or two. Although accepting a lower offer might not sound appealing, it could be the difference between securing your new home and losing it, and it could even work out cheaper than other options such as getting a bridging loan.

Bridging loans

If you don't want to lose the property you've found, and you think your property will sell quickly, then you could consider a bridging loan. Bridging loans help 'bridge the gap’ between selling your property and buying a new one.

But because for short term use, the interest rates can be pretty steep. It’s not a cheap way to borrow money, so only go for this option if you’re confident your house sale could complete sooner rather than later.

You can borrow anything from £25,000 upwards, but you'll need to have a good credit record, and the maximum loan-to-value (LTV) for bridging loans is usually 75%.

Check your mortgage offer

Mortgage offers have an expiry date, and if you decide to delay the purchase, you should check the offer will still be valid when you're able to proceed. Some but not all lenders will extend a mortgage offer, so you’ll need to check this with them.

Also, depending on the length of time involved, house prices may change, and if the property you want to buy decreases in value, the mortgage lender might want to review the offer.

Find out how long it can take to buy and sell a house.