Need Advice On Selling Flat With 3 Years Left On Mortgage Please

Riddar

Hi all,

Just looking for someone to give me the 'right' advice please as I'm juggling maths, laws and people's opinions from similar situations here and think I just need to ask the question myself

I plan to buy my council flat due to the discount I'll receive and its location being very popular. The mortgage will be for £60,000 since I will have £40,000 to put down as a deposit (discount taken into account).

Nationwide are offering me a 5 year fix at 2.99%. Due to the mortgage term I'm selecting only being 15 years, the monthly repayments are £414. I plan to overpay each month by £265. MSE Overpayment Calculator says that in 5 years, I'll only owe £25,000 on the mortgage and that it would be paid in full after 8 years.

My question is:

We want to sell after 5 years (so we keep the discount we received at the beginning). Leaving £25k left on the mortgage. If we sold after 5 years, we would have £75000 to put down on another property if the value of the flat stays the same.

Would it be stupid if we did the above or should we financially hold on an extra 3 years and pay off the mortgage in full, so then we would have the full value of the flat (currently 100k) to put down on another property?

I suppose what I'm asking is would it be foolish to sell with such a small amount left on the mortgage? would we benefit from paying it off in full even though we will move to another property and continue to overpay on that mortgage.

I'm hoping you guys just say the only difference would be the 25k that we wouldn't have if we sold after the 5 years. But I have read 'bits and bobs' about when the mortgage is fully paid, you have to pay even more for 'deeds' or something along those lines and apparently its even more complicated due to us only going to have a 125yr lease on the flat and not a freehold.

Please forgive my terminology, I'm very new to this but have spreadsheets and calculators open everywhere (and a headache! :mad: )

Help MUCH appreciated so I can plan for my families future.

Thanks!

bryanb

Buy the flat first and worry what to do after 5yrs nearer the time.

Riddar

bryanb wrote: »

Buy the flat first and worry what to do after 5yrs nearer the time.

I appreciate you taking the time to reply to my thread, however that isn't very help to me I'm afraid, sorry.

I'm the type of person who follows a plan, so I'd rather know now if I'm going to sell after 5 years or wait another 3. I hope you know what I mean

Yorkie1

Surely it will depend in part on what property prices are doing in 5 years' time?

In other words, whether what you want to buy at the end of the 5 years will go up by more than the additional £25K equity in the following 3 years.

Nobody has that sort of crystal ball. Let alone will know what your personal circumstances will be in 5 years' time.

Riddar

Yorkie1 wrote: »

Surely it will depend in part on what property prices are doing in 5 years' time?

In other words, whether what you want to buy at the end of the 5 years will go up by more than the additional £25K equity in the following 3 years.

Nobody has that sort of crystal ball. Let alone will know what your personal circumstances will be in 5 years' time.

I see where your coming from, thank you.

I guess I'm just concerned if there were anything beneficial about selling up before the mortgage is paid off that I didn't know about. Wondered whether I would be charged fee's to transfer ownership of the leasehold from the bank to me (or something along those lines, I hope you understand what I'm trying to say).

I think I will most likely stay in the flat the few extra years if there aren't any nasty surprises (fees!) added on once the mortgage is fully paid. Assuming prices stay the same, I'll have a nice £100,000 to put down on a nice house.

Thanks again.

Annisele

I think the only assumption you can make about property prices and interest rates in five years time is that they won't stay the same!

Essentially your questions is about whether you should have a £25k mortgage in five years time (on the flat), or whether you should have a larger mortgage of £25k plus the difference in value between the house and the flat. I think that in either case you plan to have a mortgage on the house in eight years.

So, between years five and eight, you'll either have a small mortgage or a large one. Certainly the smaller one would be cheaper, and it would let you save up more money. But if prices rise between years five and eight, you'd probably be better off buying the house at year five and paying the larger mortgage.

Reading that back I'm not sure it makes sense. I'll have another go if you can't work out what I mean!

Riddar

Annisele wrote: »

I think the only assumption you can make about property prices and interest rates in five years time is that they won't stay the same!

Essentially your questions is about whether you should have a £25k mortgage in five years time (on the flat), or whether you should have a larger mortgage of £25k plus the difference in value between the house and the flat. I think that in either case you plan to have a mortgage on the house in eight years.

So, between years five and eight, you'll either have a small mortgage or a large one. Certainly the smaller one would be cheaper, and it would let you save up more money. But if prices rise between years five and eight, you'd probably be better off buying the house at year five and paying the larger mortgage.

Reading that back I'm not sure it makes sense. I'll have another go if you can't work out what I mean!

I understand you, thank you

I think I will just end up overpaying the mortgage on the flat as much as I can (within reason) over the next 5 years and hopefully have 60-80k to put down on a £200k house.

Thanks everyone for your comments, I think I know what I'm to do now. Forgive me for my newbie/stupid questions. I'm just paranoid because there's so much to know, I'm going to make the wrong decision somewhere along the line

Cheers

dimbo61

I like your thinking about the security of the 5 year fix and the fact that you must keep the property for 5 years after the RTB has completed.
Are you getting the very best deal with 40% deposit.
Have you considered offset mortgages ?
Check the T&C,s of the Nationwide mortgage offer they only allow £500 max a month overpayments on many of there deals