Considering Buying A House Before You Sell Yours In The UK? – Here Is What You Need To Know

Traditionally, you sell the house you’re in before you buy another one. It’s not the easiest system in the world (anyone who’s ever been in a chain will confirm this!), but it’s the way it happens most of the time. 

However, it’s not what’s always done. There are situations where you might want to consider how to buy a house before selling yours in the UK. This could happen for several reasons, such as wanting to renovate before moving, having to relocate, downsizing, or perhaps simply because you’ve found the dream house and cannot risk letting it go. 

Whatever the reason, we’ll dive into how you can buy before you sell and what you need to know about increased Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT).

How to buy a house before selling yours in the UK

If you want to buy a house before selling yours, the house buying process is mostly the same. You’d do the same viewings as you would previously and put in an offer. 

The only difference is getting the prospective buyers to make sure your offer is seen as a serious one. Because the traditional way is to sell before you buy, some agents might not pass on your offer. They’ll assume you’ll have to wait until the sale is complete, causing a big hold-up. 

Instead, you need to make sure that you can finance the purchase without selling. So this means showing that you have the cash ready to buy – or more commonly, getting a bridging loan, which we’ll cover below. 

Bridging loans are your short-term solution to buy before you sell 

Bridging loans are short-term loans that can ‘bridge the gap’ (get it) between purchasing your new property and selling your old one. In fact, in the last quarter of 2024, investment purchases made up the majority of bridging loans transactions (Bridging Trends, 202).

These loans are quite flexible, too. They can also be used in circumstances such as buying at auction for immediate funds, breaking chains, or buying a property that isn’t eligible for a traditional mortgage. 

Unlike traditional mortgages, bridging loans are designed to be short-term only, meaning that you will usually have to pay them back within a short time frame of up to 12 months.

You’ll also find that they’re offered at a high interest rate, ranging from 6% to 20%. You may also be required to pay a deposit, as high as 25%. 

We’ll see how this works in practice by looking at Sarah and Tom’s story. They currently own a house valued at £300,000, with an outstanding mortgage of £100,000. 

They’ve just found their dream home, valued at £500,000. But they need to act now if they want to buy, before they’ve had a chance to sell their own home and release the equity. So, they turn to bridging loans. 

How do bridging loans work?

1. Sarah and Tom go to a bridging loan broker. For this, they’ll need to prepare proof of identity and address. Bank statements for the past three months and information on their current mortgage are also needed. They’ll have to prove their exit strategy and how they plan to repay the loan, which normally involves a mortgage on the new property, so they’ll also need a mortgage in principle. 
2. They secure a bridging loan for the full £500,000, which is secured against their current and new properties. 
3. With the loan in place, Sarah and Tom are able to purchase the new property. 
4. The old property goes on the market, and then sells for the full £300,000 as they’re not in a rush to move. 
5. Sarah and Tom then use the equity from the sale (£200,000 minus fees) and a new mortgage on their home to pay back to £500,000 bridging loan, plus interest and fees. 

It’s worth highlighting that bridging loans are secured loans, which means that you’ll have to secure the loan against your current property or a similar asset. So don’t think of this as a way to get some quick money – there is, like any loan, risk involved. 

There’s not one single type of bridging loan 

You can borrow up to £10 million on a bridging loan, depending on the amount of equity that you currently have in your properties. But not every bridging loan is the same.

Generally speaking, there are two different types: 

First charge bridging loan

This is used when you own your property outright, with no existing mortgage or other secured loans. Generally speaking, first charge loans come with lower interest rates and potentially simpler approval, as the lender has primary security and will be the first to be paid back once your property sells.

Second charge bridging loan

This is preferred if you have an existing mortgage or other secured loan on your property.

Your current lender holds the ‘first charge,’ and the bridging loan lender will hold the ‘second charge’ and thus be second in line to be paid back. These loans tend to be more expensive as they are riskier, and might be more difficult to get approved, as they need to get permission from your current mortgage lender.

Each bridging loan type can either be closed or open.

This means that you will have a fixed date when the loan ends (closed) or have the flexibility to pay back whenever you can (open). Open bridging loans won’t last forever, though. Lenders usually offer a maximum of 12 months to pay back your loan.

Buying without a bridging loan

How to buy a house before selling yours in the UK and without bridging loans? Although they’re the most common method, they aren’t the only option to fund the sale. Instead of bridging loans, you could also opt to: 

1. Remortgaging your home to release equity 

If you have enough equity in your home to fund your next one (which could be the case if you’re downsizing!), you can remortgage your current home to release these funds. If this is an option, it will work out cheaper than bridging loans, but it can take longer to get the deal in place. 

2. Let to Buy Mortgage

If you’re struggling to sell your current home, a let-to-buy mortgage lets you turn it into a rental property while you buy a new home with a separate residential mortgage. This effectively means you’ll have both mortgages at once, but will be able to let out your current home to get a rental income in the meantime. 

Once the LTB term is over and your property is still being rented, it can then be converted to a Buy-To-Let mortgage scheme.

In this case, you can opt for a longer mortgage term, such as a 10-year one. But, records from 2021-2022 showed that a five-year fixed BTL mortgage, with an interest rate around 3.47 per cent, was the most popular choice for landlords (Statista, 2024).

3. Secured Homeowner Loan

You can also take out a secured homeowner loan against your property’s equity. This is often faster than a remortgage, but can be riskier. They’re also recorded to have much higher interest rates than their unsecured counterparts (Pozzolo, 2002).

We’d only recommend this for those who need funds relatively quickly and have equity, but need smaller amounts than a typical bridging loan.

4. Personal Loan

For smaller amounts, personal loans could be a simpler choice to finance a new home. They can be pretty quick to get into place, but could also be at a much higher interest rate. 

If you haven’t already, it might be worth speaking to a financial advisor to go through your options and find out the best route for you. 

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Buying before selling: what tax do you have to pay? 

Now you know how to pay for your property, it’s important that you understand and account for the tax you will have to pay by buying a property before selling yours. 

You will pay increased stamp duty (but may get it back!)

The moment you complete your new purchase, you technically own two properties. This means you’ll be liable for an additional 5% SDLT surcharge on top of the standard rates. 

Let’s go back to Sarah and Tom, using the current tax rates: 

Sarah and Tom’s new property is worth £500,000. 

• Up to £125,000 of this is at a 0% rate, plus 5% for being their second property. That’s £6,250. 
• The next £125,000 (up to £250,000) is at a 2% rate, plus 5%. That’s £8,750. 
• The final amount above £250,000 is at 5%, plus 5%. That’s £25,000. 

In total, it means Sarah and Tom owe £40,000 in stamp duty. If this weren’t their second property, it would only be £15,000. 

The good news? This extra 5% isn’t always a permanent cost. You can apply for a refund of the additional SDLT you paid. That is, if you sell your original main residence within three years of buying the new property.

Your request for a refund must reach HMRC within 12 months of the sale of your old home, or within 12 months of the filing date of the SDLT return for your new home, whichever is later. 

You will be liable for Capital Gains Tax (CGT)

You need to pay Capital Gains Tax when you sell a property that isn’t your primary residence. When you buy a new home before selling your old one, your old property is no longer considered your main residence for tax purposes from the moment of purchase, making you liable for Capital Gains Tax. 

The amount you pay depends on your income tax band:

• Higher-rate taxpayers will pay 24% on gains from residential property.
• Basic-rate taxpayers will pay 18% on gains from residential property, but only on the portion of the gain that falls within their basic income tax band.

You need to pay income tax if you rent out your property 

If your plan involves buying a new main residence and renting out your old property, you’ll be subject to Income Tax on the rental income.

You don’t need to pay Income Tax if your gross rental income is £1,000 or less annually. However, if your annual income from rent is between £2,500 and £9,999 (after allowable expenses) or £10,000 or more (before allowable expenses), you’ll need to complete a self-assessment tax return.

Allowable expenses can reduce your taxable rental income. These are costs you incur for the day-to-day running and maintenance of the property, such as letting agent fees, maintenance costs, and landlord insurance.

Is buying before selling the right move for you?

Considering how to buy a house before selling yours in the UK can be incredibly appealing, especially if you’ve already found the perfect property. Although not traditional, it can help you become a more attractive buyer to sellers, as you’re not part of a complicated chain.

Plus, you avoid the hassle and expense of temporary accommodation and storage, as you can stay in your current home until your new purchase is complete.

But it can also make you more attractive as a seller if you plan to sell your first home once you’ve moved into your second one.

The owners of our current home bought their home using a bridging loan before selling their property. This was great for us because it meant that they weren’t in a chain, so we only had to worry about the downward chain.

They actually moved out two weeks before we completed the sale of the house. This meant they weren’t in a hurry to complete, as they’d already moved. And they were happy to agree to any completion date that was suggested by the rest of the chain.

However, buying before selling means you need to afford your new purchase outright.

You’ll need to take out bridging loans or other arrangements with high interest rates and fees. You’ll also incur additional costs like the higher rate of Stamp Duty Land Tax and Capital Gains Tax, while hoping that you get the expected value from your sale to pay back these loans. 

That’s why most people prefer to sell before they buy. It gives you a better understanding of your budget with exact figures and ensures that you’ll be ready to move as soon as you find the right place. However, this path brings its own set of challenges, especially if you have to become part of a long chain. 

There’s no one right answer – just what is right for you. 

Here for your property needs, whatever you decide

Whatever the right decision is for you, we’re here with the advice, tips and information you need to make your sales and purchases as seamless as possible. 

Make sure you stay up to date with Property Road, or check out our top advice on buying or selling a property.