Process and advice for selling BTL Flat whilst living elsewhere so I can move to a house

AceT

Hi,
I currently own a BTL flat and am living with parents. I want to sell this flat and move out from where I am and get my own house. Currently have about 13 years left on the mortgage. Here''s my question...I've never sold a property before and looking for advice on the best way to approach this. 
Option 1 - Should I sell the flat first and I guess pay the early repayment charge and then look for another property in my own time as and when a good property comes up.
Option 2 - Should I find a property and then ask the mortgage company to fund an additional loan amount and then sell the BTL ?
I don't know which is the most cost efficient ?
Also as its a leasehold flat is there anything I need to be aware of as ultimately I will be purchasing a house to move into.

[Deleted User]

AceT said:

Hi,
I currently own a BTL flat and am living with parents. I want to sell this flat and move out from where I am and get my own house. Currently have about 13 years left on the mortgage. Here''s my question...I've never sold a property before and looking for advice on the best way to approach this. 
Option 1 - Should I sell the flat first and I guess pay the early repayment charge and then look for another property in my own time as and when a good property comes up.
Option 2 - Should I find a property and then ask the mortgage company to fund an additional loan amount and then sell the BTL ?
I don't know which is the most cost efficient ?
Also as its a leasehold flat is there anything I need to be aware of as ultimately I will be purchasing a house to move into.

Does the BTL currently have tenants? 

How long to go until you won't have to pay the ERC? How much is the ERC and how does it compare with paying the higher rate of SDLT if you purchase the next property before selling the BTL? 

Have you made enough of a gain on the BTL to trigger a CGT bill? 

How much do you have available to help fund your next purchase? 

AceT

Yes it does have tenants.
Not sure how to tell how long to go to pay the ERC but its about £7k. I won't trigger the CGT as it was only bought in 2018 and hasn't changed much in value.
I can add more funds to fund my next purchase via additional mortgage if required. 

[Deleted User]

AceT said:

Yes it does have tenants.
Not sure how to tell how long to go to pay the ERC but its about £7k. I won't trigger the CGT as it was only bought in 2018 and hasn't changed much in value.
I can add more funds to fund my next purchase via additional mortgage if required. 

Your mortgage offer/T&C should tell you when the ERC period ends. 

Why did you purchase the BTL in the first place and is it making you a reasonable return on investment? 

If you went with option 1 you'd really need to evict the tenants first and then sell. Trying to have your cake and eat it can get messy and put buyers off. 

Option 2 and you'll get hit with the higher rate of SDLT but that might be worth it depending on how the BTL is performing. 

AceT

ERC ends in 2023 and is currently around 7k. It was bought in 2018 with 5yr fixed. I purchased originally to move into but for one reason or another we didn’t and then rented it out. Currently living with parents.  It is just above break even in terms of profit so nothing major. 

I know I can port the existing mortgage across to another property and ask for additional loan but just need the best option right now ?

AnotherJoe

Note that if you keep the BTL for a while, buy a new house and then sell the BTL, you cannot reclaim the extra 3% SDLT.

Also, you will have less equity in your new home, that may mean a higher interest rate.

I suggest that makes it more likely to be advantageous to sell the BTL now and then buy when you find something.

 

alex_163163

If you went with option 2 - where is the deposit coming from for the new house? Or is your plan to remortgage the BTL to release equity to form a deposit for new house?
You can only port the mortgage from the BTL once you have sold it I think. 

Cakeguts

Sell the Buy to Let first so that you can find out how much equity you will get to put towards the deposit on your house and then buy the house.  You really don't want to be trying to pay two mortgages if something goes wrong with the Buy to Let and you are not getting any rent coming in. Sell the buy to let after you have evicted the tenants.

Do one thing at a time.

steampowered

Option 1 sounds much cheaper and simpler.
No higher rate SDLT; no messing around with taking out and repaying mortgages.

[Deleted User]

If you can port this mortgage then option 1 would be the cheapest way to do things.

AceT

Thanks everyone. In this case I was swaying towards option 1 anyhow. I know the ERC is a pain but then I don’t have to buy somewhere immediately after selling and regain my equity before deciding what I can afford.