equity and profit selling house

peppapig14

after some advice on how people calculate profit when selling house.
e.g.. 
purchase house for £200k with £50k deposit
spent £15k on mortgage overpayments and £20k on improvements ( Windows, boiler etc )
£115k left on mortgage
sell house for £180k

do u calculate £180k - £115k= £65k as your profit, in effect getting deposit back and additional £15k
OR
do u calculate £180k-£115k=£65k.then £65k - £35k =£30k (overpayments and impovements) meaning you have in effect lost £25k of ur original deposit

Comms69

Well depending when you bought you also lost interest too. 
There's clearly no profit here. You've made a loss either way. 

Is this to do with a relationship split or?

Davesnave

We don't do these sort of calculations. What would be the point?

davidmcn

peppapig14 said:

after some advice on how people calculate profit when selling house.

Generally they don't. Is there a particular reason for your question?

jimbog

Do you factor in the fact that you didn't have to pay rent to live elsewhere?

Bossypants

The only time you'd need to do an actual calculation would be if you needed to split the profits with someone. In that case, we'd need to know who contributed what in order to help you would out something fair.

steampowered

You have missed out the mortgage payments from your calculations. For some reason your profit only includes overpayments - it should include all payments.

Your profit or loss is the amount you have after sale, minus the deposit you paid initially minus what you paid into the mortgage.

ProDave

Am I missing something?

BUY house for £200K, SELL house for £180K  = £20K LOSS

You can add your mortgage interest and buying and selling fees and improvement costs if you want making the LOSS greater.

Thrugelmir

Have you had a declaration of trust drafted ? 

Comms69

ProDave said:

Am I missing something?

BUY house for £200K, SELL house for £180K  = £20K LOSS

You can add your mortgage interest and buying and selling fees and improvement costs if you want making the LOSS greater.

Not missing anything pal.

It's a loss through and through. As far as i can tell the OP...

Paid: 
£50k upfront
£15k overpayment
£20k in equity (so presumably a decent length of ownership)
£20k on improvements

Total paid (excluding interest): £105k

Total when selling
Selling for £180k - 115K (outstanding mortgage) - (£5k fees?)
So... £60k

That's a £45k loss before interest.

eddddy

peppapig14 said:

after some advice on how people calculate profit when selling house.
e.g.. 
purchase house for £200k with £50k deposit
spent £15k on mortgage overpayments and £20k on improvements ( Windows, boiler etc )
£115k left on mortgage
sell house for £180k

do u calculate £180k - £115k= £65k as your profit, in effect getting deposit back and additional £15k
OR
do u calculate £180k-£115k=£65k.then £65k - £35k =£30k (overpayments and impovements) meaning you have in effect lost £25k of ur original deposit

What is the purpose of the calculation?

For example

1. Is it for Capital Gains Tax purposes?
2. Is it because the profit/loss has to be shared between a number of parties (e.g. Joint Owners)?
3. Is it because you have £50k cash and you want to compare a potential investment in property, with other investments?
4. Is it just an academic exercise, for no particular reason?

Or something else?


Depending on which option it is, you probably need to take into account the 'Time Value' of money, and 'Opportunity Costs'. For example:

• What is the time period between buying and selling? 6 months or 15 years?
• What else could you have done with your £50k deposit during that time? Earned interest in a bank account, invested it in some other way?
• How much mortgage interest have you paid? (Plus any other costs as a result of property ownership.)
• If you're living in the property, how much would the rent have been for living elsewhere?