Renting property but want to sell it

EL321

I'm renting my bungalow out at the moment because I bought it ten years ago, lived in it for about six then rented it out while I went to Uni.

Now I'm living with my partner and we are thinking of buying a bigger house - I'm going to have to think about selling it for finance for the new house.

If my house is worth £120 and the mortgage I've got left is £26,000 - does this mean that if I sell it I will have £90,00 to 'put in the bank'? My partner says yes but I'm sure its not as simple as that...?

Also, is there any way of trying to sell it as an investment for renting so that the current tennant can stay? I feel a bit bad about selling as the tennant has learning difficulties and has carers in and I communicate with his mother and dont really want to unsettle him if I can help it.

Thanks

EL321

sorry I meant my house is worth £120,000 - I dont think the housing market has got quite that bad!!!

nig0609

your maths sound about right if your fees in selling are 4k, also just because it is worth 120k, doesnt mean you would sell it for that.
most likely the current tennant will have to move out if you sell.

Robert_Sterling_3

EL321 wrote: »

If my house is worth £120,000 and the mortgage I've got left is £26,000 - does this mean that if I sell it I will have £90,00 to 'put in the bank'?

At first sight yes if we make the assumption that costs associated with selling the bungalow do not exceed £4,000.

I can not see what there is to disagree about. :eek: :eek: :eek:

Nenen

From what you've said I don't think you'd be liable for capital gains tax on the sale but you need to check that.

Have you thought about asking the tenant's mother if she (or any other relatives) would like to buy the bungelow if you think they might have the money? My other thought, but don't know how realistic this is, as your tenant has learning difficulties I wonder if a housing association or council might be prepared to buy it from you so he can stay there if his mum can't afford to do this. I must say, I'm really heartened to hear how much you are trying to help this man and not just take the easiest way out for yourself in the circumstances.

Millburn_farm

Ermmmmmmm selling a house with sitting tennant (be it legally or because you don't want to make them homeless) I can only see as limiting potential buyers; so price/profit/speed of sale

Why not use the rental income to reset your mortgage, i.e. 80% on the rented out property and a smaller mortgage on the one you want to buy; this would off set the tax bill

Or; for personal sercurity; keep it all to yourself; you never know

I did; and will even though we are about to go mortgage hunting for a new build my house staying all mine has helped us be together very happily for 12 yrs

Regmir

EL321 wrote: »

If my house is worth £120 and the mortgage I've got left is £26,000 - does this mean that if I sell it I will have £90,00 to 'put in the bank'? My partner says yes but I'm sure its not as simple as that...?

Wish my OH was as clever as yours

English_Bob

EL,
not sure if i'm correct, but i understood it that if you rent out your home and live elsewhere, you have to sell it within 3 years not to be liable for capital gains tax.
Please ring the Inland Revenue for the current rules, and work out what gain and tax you may incur. If i'm wrong, all is well, but if not, you need to be prepared and not be lumbered with a tax bill you can't afford.

Bob

English_Bob

yeah, sorry, but its bad news ......


Selling your own home

You don't have to pay Capital Gains Tax when you sell or dispose of your home as long as all of the following apply:

• it was your only home for the whole period you owned it (ignoring the last three years you owned it)
• you used it as your home and nothing else all the time you owned it
• for the whole period you owned it, you didn't let any of it out or didn't have more than one lodger
• the garden and area of grounds sold with it, including the site of the house, is no more than 5,000 square metres (about the size of a football pitch)
• you bought it - and made any improvements to it - to use as your home rather than to make a gain

If you meet all these conditions you're entitled to Private Residence Relief and won't have to pay Capital Gains Tax.
see: http://www.hmrc.gov.uk/cgt/property/basics.htm



Bob

EL321

Thanks for all your replies!

I am out of touch with financial issues at the moment so all your comments are helpful.

silvercar

If you owned it for 10 years and lived in it for 6 years:

The time it was your main home and the last 3 years are exempt from CGT, so we have already reduced the liability to one-tenth of the gain. You also would be entitled to letting relief (worth up to 40k) and you have a personal CGT allowance (currently 9.6k), so your gain would have to be big to end up with a tax bill. Even if there was a small liability it would only be taxed at 18% of whatever isn't covered by the reliefs I've mentioned, so no need to panic!