Selling house 2 years after buying it

willabur

Hey There,

We bought a house 2 years ago - our circumstances have changed somewhat from a working point of view and are open to the idea of selling up and moving somewhere else.
We feel with the current market that the house would probably sell for less than what we bought it for 2 years ago (40k paid in repayments). Mortgage is a 27 years approx 1800 per month in cost. House was 500k bought. We payed 10% deposit at the time.

If we were to sell what would be the minimum we would sell the house for in order to avoid negative equity? Probably a simple question but this stuff melts my brain

Thoie

willabur wrote: »

Hey There,

We bought a house 2 years ago - our circumstances have changed somewhat from a working point of view and are open to the idea of selling up and moving somewhere else.
We feel with the current market that the house would probably sell for less than what we bought it for 2 years ago (40k paid in repayments). Mortgage is a 27 years approx 1800 per month in cost. House was 500k bought. We payed 10% deposit at the time.

If we were to sell what would be the minimum we would sell the house for in order to avoid negative equity? Probably a simple question but this stuff melts my brain

Negative equity is when your house is worth less than the outstanding mortgage balance.


Your initial mortgage was 500k - 10%, so 450k.
You've paid off 40k.
So the outstanding balance on your mortgage is around 410k (but the bank will happily confirm the current balance).

Even though 410k might clear the mortgage, there are other costs to take into account. You'll need a 20% deposit for your next place, plus another 5-10k for moving costs (solicitors, estate agents, physically moving). If you have a fixed rate mortgage, there might be "break fees" - again your bank can tell you about that.

The question around what's the minimum you can accept for your house in order to move somewhere new depends on how much the new house is going to cost. Let's say you're going to move to another 500k house somewhere else.

You'd need a deposit of 100k.
You'd need 410k to clear the current mortgage.
Let's say you need 10k for all the incidentals.

So unless you have other savings/money elsewhere, you'd want to be getting 520k for your current house.


If you were going to move to a 300k house, then it would be
60k deposit
410k to clear current mortgage
10k incidentals,
So selling your house for 480k might work.


There are lots of other things to consider - what mortgage approval would you get in your current circumstances? Would you be able to get a bridging loan to cover the deposit on the new house while waiting for the money for the old house to arrive? Would the new house be a new build (in which case you might need flooring etc), or an older house that might need some work? Are your current curtains etc fairly standard sizes that can come to the new house with you?

awec

Thoie wrote: »

Negative equity is when your house is worth less than the outstanding mortgage balance.


Your initial mortgage was 500k - 10%, so 450k.
You've paid off 40k.
So the outstanding balance on your mortgage is around 410k (but the bank will happily confirm the current balance).

Even though 410k might clear the mortgage, there are other costs to take into account. You'll need a 20% deposit for your next place, plus another 5-10k for moving costs (solicitors, estate agents, physically moving). If you have a fixed rate mortgage, there might be "break fees" - again your bank can tell you about that.

The question around what's the minimum you can accept for your house in order to move somewhere new depends on how much the new house is going to cost. Let's say you're going to move to another 500k house somewhere else.

You'd need a deposit of 100k.
You'd need 410k to clear the current mortgage.
Let's say you need 10k for all the incidentals.

So unless you have other savings/money elsewhere, you'd want to be getting 520k for your current house.


If you were going to move to a 300k house, then it would be
60k deposit
410k to clear current mortgage
10k incidentals,
So selling your house for 480k might work.


There are lots of other things to consider - what mortgage approval would you get in your current circumstances? Would you be able to get a bridging loan to cover the deposit on the new house while waiting for the money for the old house to arrive? Would the new house be a new build (in which case you might need flooring etc), or an older house that might need some work? Are your current curtains etc fairly standard sizes that can come to the new house with you?

He has paid 40k in repayments, but that doesn't mean 40k has come off the capital of the mortgage. There'll be a tonne of interest in there.

OP: you need to ask the bank what the current mortgage balance is. If your house is worth more than this balance then you can sell, but the reality is you'll be down a lot of money as you're buying and selling in such a short time. If it's worth less than this then you're in negative equity and likely can't sell.

Say for example you bought it for 500k, and it's now worth say 450k. Your outstanding mortgage balance is say 430k after 40k payments. You sell and you get 20k in your pocket after clearing the mortgage, but you've pumped 90k (50 deposit + 40 payments) into the house. You've spent 90k to get 20k. And you need to find a 20% deposit for your next place. You'd be a bit mad to sell in these circumstances unless you're really desperate to move.

awec

One other thing to note, if you used HTB for your purchase and you sell the house within 5 years you have to pay back the money to revenue pro-rata.

So if you claimed the max for your 500k house, which is 20k, and you sold it within 2 years you'd owe revenue 16k. If you sold within 3 years you'd owe revenue 12k. You bought in 2018 so not sure if you're within 2 years or not.

Murt10

You might also want to take into account when calculating your loss/profit, the total how much you would have paid in rent, had you not owned your own house.

Take the market rent, inevitably this will be greater than E2,000 pm. Over 2 years this amounts to over E48,000, a not inconsiderable amount.

Plus, all during that time, you also owned your house and wouldn't have had the mental stress of pouring money into a black hole, with no benefit for you. .

Thoie

Murt10 wrote: »

You might also want to take into account when calculating your loss/profit, the total how much you would have paid in rent, had you not owned your own house.

Take the market rent, inevitably this will be greater than E2,000 pm. Over 2 years this amounts to over E48,000, a not inconsiderable amount.

Plus, all during that time, you also owned your house and wouldn't have had the mental stress of pouring money into a black hole, with no benefit for you. .

They're not trying to calculate their profit/loss - they're trying to figure out what's the minimum amount they'd need to sell their house for in order to buy somewhere else.

As awec and I both said, it really comes down to what the outstanding mortgage balance is, and what's the price of the new house.

jetfiremuck

please remember your house is not an investment. A good local auctioneer (do a thorough search) will be able to give you a good idea of its value. the cost to change is the most important and the time frame you want to sell your own and repurchase. Good luck