Selling homes- keeping profits whilst buying a new property

ad16

Hi, 
im looking for advice on mortgages and equity. 

Me and my partner have just purchased our first home, a renovation project for £150000. We plan on spending £30000, and it is likely to be worth around 230000 when done up leaving us with 50000 profit. 

We then want to buy a house for probably around £230000 that we plan to live in as our family home but we’d also like to keep the profit if possible to have savings behind us. 

We’ve applied for a 5 year fixed mortgage which has a 5% early redemption fee. Our plan is to port to mortgage over, and have an additional mortgage to cover the rest. Ideally, we only want to put 10% on our new property, so that we can keep the profit to save.  

My question is are we able to keep the profit once the house is sold as the mortgage and deposit will cover the full value of the house, or will all of this have to go over to the next house? Are we able to ask our solicitor to sent the £50000 profit over to us on completion? 

Hoenir

Your lender might not be agreeable to a port at 90% LTV?  Why borrow more than you need to. Interest rates will be higher as well. 

eddddy

ad16 said:

My question is are we able to keep the profit once the house is sold as the mortgage and deposit will cover the full value of the house, or will all of this have to go over to the next house? Are we able to ask our solicitor to sent the £50000 profit over to us on completion? 

You can do that if the numbers add up. 



If I've understood your numbers correctly, you hope to...

• Sell your current house for £230k

• Keep back £50k

• Buy another house for £230k (with a 90% LTV mortgage)

So...

• You want a 90% LTV mortgage on your next house. Is your current mortgage a 90% LTV product?

• presumably you want to increase your mortgage by £50k to cover the £50k you're keeping back, when you buy the next house.

Obviously, your mortgage lender will need to do all the checks to make sure you can afford to borrow (and repay) the extra £50k.


And the extra £50k won't be on the same terms (i.e. fixed rate) as your current mortgage. It will be on whatever terms the mortgage lender has available when you buy the next house.

SDLT_Geek

ad16 said:

Hi, 
im looking for advice on mortgages and equity. 

Me and my partner have just purchased our first home, a renovation project for £150000. We plan on spending £30000, and it is likely to be worth around 230000 when done up leaving us with 50000 profit. 

We then want to buy a house for probably around £230000 that we plan to live in as our family home but we’d also like to keep the profit if possible to have savings behind us. 

We’ve applied for a 5 year fixed mortgage which has a 5% early redemption fee. Our plan is to port to mortgage over, and have an additional mortgage to cover the rest. Ideally, we only want to put 10% on our new property, so that we can keep the profit to save.  

My question is are we able to keep the profit once the house is sold as the mortgage and deposit will cover the full value of the house, or will all of this have to go over to the next house? Are we able to ask our solicitor to sent the £50000 profit over to us on completion? 

You should consider whether the "profit" from your "renovation project" is liable to income tax, rather than being treated as a capital gain.

Tucosalamanca

Unforeseen items and budget overspend, house being valued less than you're expecting, buyer offering below valuation.
Two lots of legal expenses and the expectation that your next property will be available and within budget.
Also assuming that the economy will keep ticking over nicely with no nasty shocks in store.

I admire your aims and can do attitude but it's certainly not without risk?

I'm in the trade and don't know any builders/investors who are currently flipping properties for this kind of return.
The past decade or so has been easy, you barely needed to do anything to achieve a 25% return, other than buy the property and wait.
It's a very different game now with higher interest rates, high valuations/stretched affordability, higher costs for everything and house price increases having slowed dramatically.

What skills do you both have, have you worked on projects like this before?

pleasedelete

If you are planning to spend £30k then you will need at least £50k in cash (money for renovation plus plus overspend/contingency)
Cant you just use the £50k as a further deposit and go straight for the £230k house- much less risk