Selling house to be better off - Discuss
Discussion
I’m trying to understand a financial decision that seems unwise but I can't articulate why.
Situation: A couple is selling their house to move abroad. Due to a work opportunity, they need to stay in the country for another 12 months.
Mortgage remaining: £200k
House value: £700k
House sale: Set to complete in the next month or two
Net proceeds from sale: £500k
Options for the next 12 months:
Option 1: Remain in the House
Pull out of the sale and continue living in the house.
Monthly mortgage payment: £1,900 (current base rate 5.25%, £900 going towards capital).If they fix rate, will be caught in early repayment fee when selling in next 12 months.
After 12 months: Additional £10,800 in equity, total expenditure of £22,800 in mortgage payments.
Additional costs: Solicitor fees and upkeep of the house.
Option 2: Proceed with the Sale
Place £500k in savings accounts with FSCS protection via HL.
After 12 months: Earn approximately £25,219 in interest. - Tax would be around 6k I think.
Rent a property for 12 months: Estimated cost of £1,800 per month, total expenditure of £18,000.
The couple can move to a cheaper area, no significant hardship as they are a young couple without children.
Am I correct in thinking that Option 2 is the more sensible financial decision? They could cover the rent with the interest alone and will fully save their wages for a year?
Situation: A couple is selling their house to move abroad. Due to a work opportunity, they need to stay in the country for another 12 months.
Mortgage remaining: £200k
House value: £700k
House sale: Set to complete in the next month or two
Net proceeds from sale: £500k
Options for the next 12 months:
Option 1: Remain in the House
Pull out of the sale and continue living in the house.
Monthly mortgage payment: £1,900 (current base rate 5.25%, £900 going towards capital).If they fix rate, will be caught in early repayment fee when selling in next 12 months.
After 12 months: Additional £10,800 in equity, total expenditure of £22,800 in mortgage payments.
Additional costs: Solicitor fees and upkeep of the house.
Option 2: Proceed with the Sale
Place £500k in savings accounts with FSCS protection via HL.
After 12 months: Earn approximately £25,219 in interest. - Tax would be around 6k I think.
Rent a property for 12 months: Estimated cost of £1,800 per month, total expenditure of £18,000.
The couple can move to a cheaper area, no significant hardship as they are a young couple without children.
Am I correct in thinking that Option 2 is the more sensible financial decision? They could cover the rent with the interest alone and will fully save their wages for a year?
12 months at £1800 is not £18,000 
Another thing to consider is the figures you are talking about are almost immaterial vs. the value of the house. Is the sale at £700k agreed/guaranteed? Do you think the house would sell for more or less than that in 12 months time? Even a 1-2% shift in either direction is going to materially alter your ‘additional equity’ estimation.
Another thing to consider is the figures you are talking about are almost immaterial vs. the value of the house. Is the sale at £700k agreed/guaranteed? Do you think the house would sell for more or less than that in 12 months time? Even a 1-2% shift in either direction is going to materially alter your ‘additional equity’ estimation.
deggles said:
12 months at £1800 is not £18,000
Another thing to consider is the figures you are talking about are almost immaterial vs. the value of the house. Is the sale at £700k agreed/guaranteed? Do you think the house would sell for more or less than that in 12 months time? Even a 1-2% shift in either direction is going to materially alter your ‘additional equity’ estimation.
Another thing to consider is the figures you are talking about are almost immaterial vs. the value of the house. Is the sale at £700k agreed/guaranteed? Do you think the house would sell for more or less than that in 12 months time? Even a 1-2% shift in either direction is going to materially alter your ‘additional equity’ estimation.
You can see why I am asking for financial advice, when I'm failing at basic math!House sale agreed and waiting on completion.
I don't think the house will increase, it's been sold over asking price, would need a real increase in the house market for it to increase, but it is a really difficult think to know.
Selling now is a no brainer IMO.
1. Not a huge amount in it financially.
2. Avoids the risk of a slow sale a year from now and timing the sale with leaving
3 Makes the decision of when/f to come back more flexible in future.
4 Means if they come back to UK to jobs in a different part of the country they are not stuck with a house in the wrong place.
5 Avoids the risk of any changes to capital gains tax on main residence by new govt. I think that unlikely but why take a risk you can avoid?
6 If they end up staying abroad permanently they might need to sell it to prove non residence. Guessing here as I know bugger all about residence rules.
1. Not a huge amount in it financially.
2. Avoids the risk of a slow sale a year from now and timing the sale with leaving
3 Makes the decision of when/f to come back more flexible in future.
4 Means if they come back to UK to jobs in a different part of the country they are not stuck with a house in the wrong place.
5 Avoids the risk of any changes to capital gains tax on main residence by new govt. I think that unlikely but why take a risk you can avoid?
6 If they end up staying abroad permanently they might need to sell it to prove non residence. Guessing here as I know bugger all about residence rules.
Prisoner 24601 said:
At a guess....i reckon the value of the house will go down over the next 12 months, related to the incoming government. The general public may end further tightening their purse strings, with a general reduction in the number of buyers in the market.
I'm not so sure. Labour are doing a new Freedom To Buy scheme, government secured mortgages to get youngsters on the housing ladder.
Which is only going to ramp up house prices if they do, probably ending up doing more damage than good.
Oh and will build 1.5 million new homes...
“We will reintroduce housing targets, build on disused grey belt land, fast track permissions on brownfield and build the next generation of new towns”
First dibs policy “work with developers to give local people ‘first dibs’ on new developments, ending the farce of entire developments sold off to international investors before local people get a look in.”
How is that actually going to work?
"Well we offered these £600k starter homes for first time buyers but they weren't interested so we sold them to the highest bidder."
Their other promise is...
Tax foreign buyers to fund planning officers: “tax foreign buyers pricing out young people to fund new planning officers to approve homes next generation needs”
Now, to be fair, this is something so many other countries do and we should have been doing years ago.
But overall I can see these ideas back firing and having the opposite effect and will see prices climb back up again like they always do when lending gets easier.
There needs to be some pain for house prices to slow down and get back to being affordable once more.
This is the insanity of youngsters cheering on the increase in population by 750k a year and then screaming that house prices are too high.
Many of those coming here will be working those jobs that pay minimum wage, and while they flood in those jobs can get away with paying minimum wage, which suppresses wages across the board and thus means the buying power of your wage compared to a few years ago is pathetic.
Of course there are other factors, but that is a big one.
But for me, if definitely selling, out of selling now or in 12 months, sell it now and get it done and dusted.
Edited by Ed.Neumann on Sunday 7th July 23:51
Tax position might also affect rental income too, not forgetting that there is also the time before and after the renting period to consider.
Interest generated in savings will also be at the rate of tax for the highest earner assuming its stuck into their account and they do returns.
Personally I wouldn't want the risk of a tenant that might go awry when the mortgage is free and clear from ERC etc.
You also carry a risk for repairs on the property which is something that could eat into any profits.
Interest generated in savings will also be at the rate of tax for the highest earner assuming its stuck into their account and they do returns.
Personally I wouldn't want the risk of a tenant that might go awry when the mortgage is free and clear from ERC etc.
You also carry a risk for repairs on the property which is something that could eat into any profits.
Seventyseven7 said:
I’m trying to understand a financial decision that seems unwise but I can't articulate why.
Situation: A couple is selling their house to move abroad. Due to a work opportunity, they need to stay in the country for another 12 months.
Mortgage remaining: £200k
House value: £700k
House sale: Set to complete in the next month or two
Net proceeds from sale: £500k
Options for the next 12 months:
Option 1: Remain in the House
Pull out of the sale and continue living in the house.
Monthly mortgage payment: £1,900 (current base rate 5.25%, £900 going towards capital).If they fix rate, will be caught in early repayment fee when selling in next 12 months.
After 12 months: Additional £10,800 in equity, total expenditure of £22,800 in mortgage payments.
Additional costs: Solicitor fees and upkeep of the house.
Option 2: Proceed with the Sale
Place £500k in savings accounts with FSCS protection via HL.
After 12 months: Earn approximately £25,219 in interest. - Tax would be around 6k I think.
Rent a property for 12 months: Estimated cost of £1,800 per month, total expenditure of £18,000.
The couple can move to a cheaper area, no significant hardship as they are a young couple without children.
Am I correct in thinking that Option 2 is the more sensible financial decision? They could cover the rent with the interest alone and will fully save their wages for a year?
Lock it in now. I would also consider moving the cash to whatever country they are planning to move to IF they are happy with the current exchange rates.Situation: A couple is selling their house to move abroad. Due to a work opportunity, they need to stay in the country for another 12 months.
Mortgage remaining: £200k
House value: £700k
House sale: Set to complete in the next month or two
Net proceeds from sale: £500k
Options for the next 12 months:
Option 1: Remain in the House
Pull out of the sale and continue living in the house.
Monthly mortgage payment: £1,900 (current base rate 5.25%, £900 going towards capital).If they fix rate, will be caught in early repayment fee when selling in next 12 months.
After 12 months: Additional £10,800 in equity, total expenditure of £22,800 in mortgage payments.
Additional costs: Solicitor fees and upkeep of the house.
Option 2: Proceed with the Sale
Place £500k in savings accounts with FSCS protection via HL.
After 12 months: Earn approximately £25,219 in interest. - Tax would be around 6k I think.
Rent a property for 12 months: Estimated cost of £1,800 per month, total expenditure of £18,000.
The couple can move to a cheaper area, no significant hardship as they are a young couple without children.
Am I correct in thinking that Option 2 is the more sensible financial decision? They could cover the rent with the interest alone and will fully save their wages for a year?
When our interest rates start to come down they could be hit with the double whammy of less interest and a worse exchange rate.
Edited by Zolvaro on Monday 8th July 09:35
IMO you would be mad to cut off the current sale for 12 months.
We went on the market in Sept last year. Its looking like its going to be the end of the summer when we finally move.
Just rent somewhere and be done with it.
This is assuming your job move is rock solid. I.e you own the company, or you are in a position of power within said org etc.
We went on the market in Sept last year. Its looking like its going to be the end of the summer when we finally move.
Just rent somewhere and be done with it.
This is assuming your job move is rock solid. I.e you own the company, or you are in a position of power within said org etc.
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