Selling House after only living there 8 months.

JamesC3

Hi,

I have been offered the opportunity to work in the USA (for the same company). Still a lot of hurdles to get through and I will have to visit there first. So the earliest this could happen is in 6 months time. My biggest fear/stumbling block could be our house. We have only been living there since june 2021, 8 months.

Reading through my other threads, my life has been ever changing and a whirlwind the last few years. After I had a serious gambling debt, we finallly saved up money to put down a £20,000 deposit on a £375,000 house and also used the Help To Buy Scheme.

As I am clueless when it came to buying I got some great advice here. Now I'm after some (potentially) selling advice.

With the above in mind, would we be able to sell the house? The deposit wasn't a great amount? Would there be negative equity? Would the HTB Scheme be a problem?

As you can tell totally clueless when it comes to selling a house as well!!

Any help or guidance would be greatly appreciated.

Thanks,
James

Exodi

JamesC3 said:

With the above in mind, would we be able to sell the house? The deposit wasn't a great amount?
You can sell your house whenever you want (presuming you find a buyer at a price you want) - whether it makes financial sense is a different matter

Would there be negative equity?
No-one on this forum can know that. You'll need to work out what the house is currently worth by looking at comparables SOLD PRICES near you, maybe speaking to some estate agents and comparing it to what you owe. Was the house a new build?

Would the HTB Scheme be a problem?
It complicates matters, but it's not a problem. You will have to speak to them prior to selling the house to understand what you need to do to satisfy your commitments to them.

As you can tell totally clueless when it comes to selling a house as well!!
Personally, I think you've missed likely the biggest obstacle - I'm presuming you have a ~280k mortgage, probably on a fixed term deal. Selling a house during the fixed period very commonly invokes Early Repayment Charges (ERC's) - often these are highest at the start of the term. As an example, if I sold in the first year of my 5 year term, I'd have an ERC of 5%. In your circumstances this is £14k. You need to find out if you have any ERC attached to your mortgage.

Any help or guidance would be greatly appreciated.

Thanks,
James

As above - I'd certainly spend a long time thinking on this, I can't see that you wouldn't lose a lot of money selling in the short term.

JamesC3

Exodi said:

JamesC3 said:

With the above in mind, would we be able to sell the house? The deposit wasn't a great amount?
You can sell your house whenever you want (presuming you find a buyer at a price you want) - whether it makes financial sense is a different matter

Would there be negative equity?
No-one on this forum can know that. You'll need to work out what the house is currently worth by looking at comparables SOLD PRICES near you, maybe speaking to some estate agents and comparing it to what you owe. Was the house a new build?

Would the HTB Scheme be a problem?
It complicates matters, but it's not a problem. You will have to speak to them prior to selling the house to understand what you need to do to satisfy your commitments to them.

As you can tell totally clueless when it comes to selling a house as well!!
Personally, I think you've missed likely the biggest obstacle - I'm presuming you have a ~280k mortgage, probably on a fixed term deal. Selling a house during the fixed period very commonly invokes Early Repayment Charges (ERC's) - often these are highest at the start of the term. As an example, if I sold in the first year of my 5 year term, I'd have an ERC of 5%. In your circumstances this is £14k. You need to find out if you have any ERC attached to your mortgage.

Any help or guidance would be greatly appreciated.

Thanks,
James

As above - I'd certainly spend a long time thinking on this, I can't see that you wouldn't lose a lot of money selling in the short term.

Many thanks for the detailed reply @exodi

Certainly a lot to take in. Didn't even think of the ERC. I''m on a 2 year plan and it states 3% in 1st year and 2.5% in 2nd year.
As you say a lot of thinking time needed and the ERC costs would be something that would have to be factored in, if they really want me to take up the role.

Yes, this house was/is anew build. There's only 10 (all the same) houses on this site. All occupied and all the exact same size. A guy did have his revalued last month and did say the value had increased. Although didn't say how much by. I'll have to do some asking.

Thanks again.
James

newsgroupmonkey_

An ERC of 5%? Wow! That's harsh. We have a 5 year fixed and ours was 3%, reduced to 2% after a year.

Exodi

newsgroupmonkey_ said:

An ERC of 5%? Wow! That's harsh. We have a 5 year fixed and ours was 3%, reduced to 2% after a year.

Indeed! With Nationwide, taken out in 2019. 5% in year 1, 4% in year 2, etc.

I actually ended up breaking up with my parter of 10 years in the first year of our mortgage so pretty disasterous - thank god I was able to buy her out!!

JamesC3

HI Exodi,
Sorry, one more question. You are correct we have a £280k mortgage. Say the total repayment is £400k with interest.
If we were to sell, would the £400k be reduced as any other loan, i.e. the Interest charge for years 2/3 years - 24 years, would be deducted from the £400k. (Obviously still have to pay the ERC).

nicmyles

That is correct. Early repayment charge aside, you don't have to pay interest on the years after you paid back the mortgage amount via a sale (if I understand your question). 

theartfullodger

Congrats on improving your life, good for you, great news!

With you selling that quickly, HMRC may decide that any gain is subject to income tax (rather than e.g. CGT - which wouldn't apply assuming this was your primary residence).  Could be painful.

Whatever you do, make sure you've safely filed all fees, expenditure, repairs etc etc 

Might make sense - for a variety of reasons see ** - to delay selling and e.g. rent the place out for a bit...

** - you/other members of family might decide you don;t like the new job/USA and decide to come back..
- they might fire you in the USA (even less protection for employees over there usually)
- family crisis back in UK might mean you need to come back
- etc etc etc

JamesC3

nicmyles said:

That is correct. Early repayment charge aside, you don't have to pay interest on the years after you paid back the mortgage amount via a sale (if I understand your question). 

Yes, that's perfect thanks. 

Exodi

JamesC3 said:

HI Exodi,
Sorry, one more question. You are correct we have a £280k mortgage. Say the total repayment is £400k with interest.
If we were to sell, would the £400k be reduced as any other loan, i.e. the Interest charge for years 2/3 years - 24 years, would be deducted from the £400k. (Obviously still have to pay the ERC).

Hi James,

I think you're confused about how mortgages work (based on your statement 'the total repayment is £400k with interest'?). If you repaid the loan, you wouldn't be expected to still pay the 24 years worth of interest.

Every time you make a payment, it's made up of a bit of interest and a bit of principle (what you owe on the mortgage).

As an example, if your mortgage payment was £1000, possibly £800 would go towards interest at the start, and £200 off the mortgage balance. In this example, after this payment your new mortgage balance would be £279,800. As a tip, at the start of a mortgage, you generally pay mostly interest, at the end you generally pay mostly principal (this is called mortgage amortization if you want to google it and happens because the monthly payment is kept the same, but the amount you owe on the house goes down).

When you sell - you will only be expected to pay your current mortgage balance (you can usually see what this is with online banking). You would also need to get pay the target (the HTB association) - who will require being notified of the offer and require a survey confirming the offer as fair.

To 'complete' the transaction, the solicitor will ensure the finances are in place to do so. If you have equity, they will pay you whatever is left over. If you do not have equity, they will require you to transfer them the shortfall to complete the transaction.

JamesC3

theartfullodger said:

Congrats on improving your life, good for you, great news!

With you selling that quickly, HMRC may decide that any gain is subject to income tax (rather than e.g. CGT - which wouldn't apply assuming this was your primary residence).  Could be painful.

Whatever you do, make sure you've safely filed all fees, expenditure, repairs etc etc 

Might make sense - for a variety of reasons see ** - to delay selling and e.g. rent the place out for a bit...

** - you/other members of family might decide you don;t like the new job/USA and decide to come back..
- they might fire you in the USA (even less protection for employees over there usually)
- family crisis back in UK might mean you need to come back
- etc etc etc

That's great. Many thanks for the helpful reply and the pointers re HMRC and other reasons etc.

Certainly a lot to take in....will have to do a lot of research.