Selling House after only living there 8 months.

JamesC3

Exodi said:

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.

Many thanks Exodi. I understand now and have just found that document re Interest and Principle you mentioned.

Thank you for that.
James

MaryNB

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.

Halifax is 5% for a 5 year fix reducing by one percentage point each year. At one point during the pandemic Virgin Money was providing 90 LTV mortgages that were fixed for 7 years, 7% ERC for at least the first two years.