I have to decided to sell but ...

Fab10

*** I have a house which has been let out since purchase 10 years ago.
*** I am not making any profit ie the rental income only covers the mortgage.
*** The property has not been looked after by the tenants hence I need to spend my money to do up the kitchen, bathroom and doors etc.
*** My intention was to move in to the property as a home for me for many years to come but :think:
:think::think: I have now decided that I will sell this house after some renovation in order to then buy a much better house within 18 months hopefully.

:question::question::question: My question is with £67k outstanding on the mortgage should I make any large payments to reduce the mortgage amount (knowing that i am definetly going to sell the property) or should I keep the money in a savings account (which will then along with the sale of the house go towards deposit of new house) ???

Any help or advice will be very much appreciated

G_M

????
What difference does it make? You either pay off (some/all of) the mortgage now, or when you sell. At the end of the day you'll have broadly the same amount (sale price - mortgage + savings - costs).


The only relevant factors are
* what interest rate is your mortgage
* what interest rate are your avings
* is there an Early Redemption fee on the mortgage
* how long aprox till you sell


?


ps - don't forget Capital Gains Tax.......

kuratowski

In fact CGT is quite a good reason not to do up the place before you sell, I would have thought.

Fab10

*what interest rate is your mortgage = 2.5%
* what interest rate are your Savings = 0.5%
* is there an Early Redemption fee on the mortgage = No fee
* how long aprox till you sell = 12 to 18 months

Capital Gains Tax????

Fab10

In fact CGT is quite a good reason not to do up the place before you sell, I would have thought.

Ps can you expand on this?

If we count both myself and my husband being named on the property then I believe we should have a combined allowance of £23,400 meaning we may have a tax bill of around £4K or less

BrassicWoman

you seem horrified that you need a new kitchen after 10 years renting - I think this is a normal business expense!

Fab10

No not horrified but more so a mention that yes some work is needing done to get the property up to standard.

Apologies if I came across wrongly.

G_M

Shazay10 wrote: »

In fact CGT is quite a good reason not to do up the place before you sell, I would have thought.

Ps can you expand on this?

If we count both myself and my husband being named on the property then I believe we should have a combined allowance of £23,400 meaning we may have a tax bill of around £4K or less

Not sure what 'expansion' you need.


If you've done your calculation right and will only have a tax bill of £4K or less, then fine - you know what you're doing.


as you've given us no figures, we cannot comment or correct.

G_M

*what interest rate is your mortgage = 2.5%
* what interest rate are your Savings = 0.5%
* is there an Early Redemption fee on the mortgage = No fee
* how long aprox till you sell = 12 to 18 months

Do the maths! Paying off some of the mortgage early:

*you save yourself mortgage interest at 2.5% on £ZK for 12 months = £Y
* your income tax bill will increase by £X
* you'll lose interest at 0.5% on the £ZK savings for 12 months = £W


Is the gain worth doing?

Fab10

Apologies I hadn't mentioned any figures so here goes -

I purchased the property for £167k
Hoping to sell for around £200k

Renovation I am thinking will cost maybe £10k but not sure if that counts for anything?

Hope helps

Mojisola

kuratowski wrote: »

In fact CGT is quite a good reason not to do up the place before you sell, I would have thought.

Also I'd rather buy something at a reduced price and put in my own kitchen than have to live with a brand-new set-up that is someone else's taste.