Selling current property, clearing debt, and upgrading

gasandelectricity

Hi all

I'm 27, single and an existing homeowner, I'm considering moving but have particularly niche financial circumstances and was wondering if there is a mechanism for doing what I want to do. Please accept my apologies and move if this belongs better in the mortgages forum.

I purchased my current property in late 2014 new build on the help to buy scheme. Since, Zoopla extrapolates property value up by around 40,000 and that feels about right. I've modelled that I have about £38k in equity after homes &a communities take their cut in the increases, assuming they're correct in the increase.

So, nice desposit right for moving on? Not quite. I am very very lucky in that I have been given very very good shares, completely free in my employer which has grown 6x since I joined it a number of years ago. They vest in 11 months time, and the sensible option would be to wait, but I don't want to wait it out as due to income multiples I'm worried about house prices outpacing my increase in income over the same period. That and I'm ambitious and want to upgrade.

So I've segwayed but that should provide useful context. Due to these shares I have been getting a bit carried away over the past few years. There has been a plan, in fact half of the cash was cheeky maneouvering to fund a deposit for the first place. The debt amount is 21k though so quite chunky.

So take out enough money for another property again on help to buy, deduct the 21k, and a bit for mortgage early exit fees, I'll be pretty much netting out. So I'm confident I could buy a more expensive property and leave myself fully debt free and in a better place month to month there than I am currently, with a c.40-50k windfall due in January to potentially pay off the help to buy element, or reduce LTV and save on interest. The mortgage calculators show for price of the properties I'm keen on I'm a little touch and go on income but it might work out on condition of clearing loan and CC debts.

I'm not too worried about holding fees, solicitors and stamp duty as there are bonuses which can help me get them covered, and for sale can look at exchange programmes. What I'm interested in is does this work in terms of paying deposits upfront, and clearing the debts to satisfy mortgages everything is cleared? As I have limited cash flow in this situation.

ThePants999

I know it's terrible of me to post just to correct something when I don't have actual advice to offer, but on this occasion I can't resist.

gasandelectricity wrote: »

So I've segwayed but that should provide useful context.

Unless you mean you wrote all that while on one of these, I think you mean "segued"

Davesnave

ThePants999 wrote: »

I think you mean "segued"

I dunno, those Segways are pretty expensive.....

......and then there's the life insurance:

http://www.bbc.co.uk/news/uk-england-14167868

[Deleted User]

Have you heard of delayed anticipation lol? Surely you can wait 11 months. Its not exactly a long time.

The problem with living now based on an anticipated share price is the debts just get larger and larger, and eventually catch up with you.., and may even be far larger than the anticipated income (human nature being what it is). You could have something bad (period of sickness, accident etc) happen that could affect your future and cause you to end up in a big hole. The anticipated income from shares is only anticipated.

So many people end up in trouble by doing what you are doing.

Why not take a more measured approach.., go on the debt free wannabe board, have a look at your budget, see what you can cut back and get yourself in better shape financially NOW, without cutting into these anticipated gains. Why throw money away on increasing debt costs? Do you really want to subsidise the banks?

I know that's not what you want to hear and you'll probably ignore this post .., but its probably what you need to hear.

getmore4less

Long post not a lot of info.

Extracting the bits that matter.

approx £38k equity
approx £21k debt(borrowed deposit)

shares vesting in 11m approx £40k-£50k

wants to upsize (still shared ownership).

or is that remortgage and buy another place not clear.

Cakeguts

Forget the Zoopla valuation. Zoopla valuations are nearly always completely wrong. If you bought a new property in 2014 it is unlikely to have risen in value at all it may even be worth less than you paid for it. New properties have a premium on then because they are new. Once someone has lived in them they become like any other property. To get an accurate valuation you have to find a similar property in the same area that has sold recently.

So realistically you have the money from the shares and a lot of debt and that is all. The most sensible thing to do now is to pay off the debt

steampowered

I thought you weren't eligible for "Help to Buy" if you already own a property? Please correct me if I'm wrong.

I do not think it is wise to rely on the shares to clear your debt. If the shares have increased by 6x they could easily fall by 6x.

For example take ASOS shares. From 2012-2014 they increased from 1863p to 7039p. From 2014-2015 they dropped back down to 2124p.

It sounds to me like it might be more sensible to wait for the shares to vest and sell them, before you upgrade your property. In the meantime focus on living within your means and paying off some of the debt. Also make sure the debt is at the lowest interest rate possible (e.g. balance transfer onto a 0% interest card if possible).

Are house prices really likely to increase that much in 11 months? It sounds unlikely to me. According to Halifax the average annual increase in house prices is currently running at 5.7%.

ReadingTim

• The value of shares can go down as well as up - a lot can happen in 11 months. Rapid company growth can precede an equally rapid fall.
  
• What is the tax treatment of the share options/awards on vesting? HMRC tend to want their cut, so does your £40k-£50k figure account for that?
  
• Are there any restrictions on the number of shares you can sell? Some companies have share ownership guidelines ie you must retain a percentage (or multiple) of salary in shares, rather than selling all at the earliest opportunity.
  
• Zoopla numbers are almost completely meaningless, so don't bank on them. You may also find that you won't recoup the premium you paid for your new build, because it's no longer "new"

It sounds like you're trying to count your chickens before they hatch, and if your gamble doesn't work out the way you hope, you'll be in a pretty deep hole in a year's time. The "wealth" you think you have to buy a new place is paper wealth only, and might not crystallise; furthermore, you seem to have spent a chunk of it already.

I can't see anyone helping you any more than they'd help lend you a large sum of money to put on the 3.15 at Newmarket, and if they did, you'd pay a huge premium for it, plus a year of nervousness and stress waiting to see if your gamble has paid off. Suggest you wait until the shares vest and your current place is on the market before you go house shopping - at least then you'll know how much you have to spend. Sorry if this isn't what you want to hear.

teddysmum

As has been said, Zoopla estimates are way out.


Our road has five different property designs, some with added rooms, but Zoopla produces valuations showing some which were the cheapest to buy (when new) being worth more than the dearest and identical houses varying by about a third.


One house was bought cheaply, is being done up cheaply and still needs lots of work, yet is forecast to have gained £50000 in a few months (prices aren't rising like that here) and to be worth £20000 more than an identical house (but having a conservatory), a few doors away, which is fitted out to a good standard .