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trading up.

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  • 08-03-2011 12:17am
    #1
    kev1.3s
    Registered Users Posts: 4,358 ✭✭✭


    Hi I think I'm in the right forum with these questions but the mods can move it if I'm not.

    Anyway I've got a couple of questions about trading up as I'm pretty new to all this. We bought our first house in 2008 off the local council as an affordable house for first time buyers, if you are unaware of the deal we buy the house off the builder and get a loan from the council under the condition that we don't sell the house for ten years if we do sell then we have to give our profits or a percentage of our profits back to the council depending in how long we stay in the house for the agreed ten years. A while ago we were offered a larger unfinished home for a lot less than what I believe to be the market value of our home and as I'm involved in construction I believe I could turn this around and take advantage of this situation. My question is if I were to sell my current home I would be selling it for less than the price that I paid for it and therefore I would avoid the claw back clause in the contract with the council making this probably an ideal time to be thinking of making the move but do I have to return the proceeds of the sale to the council and apply for a new loan from a bank/ building society or can I re-invest the money into our new home?
    As I've already said I'm in construction and even though our mortgage is not in arrears I'm under no illusion that any application from me to a financial institution would only lead to failure!


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    #2
    chris85
    Registered Users Posts: 4,502 ✭✭✭chris85


    kev1.3s wrote: »
    Hi I think I'm in the right forum with these questions but the mods can move it if I'm not.

    Anyway I've got a couple of questions about trading up as I'm pretty new to all this. We bought our first house in 2008 off the local council as an affordable house for first time buyers, if you are unaware of the deal we buy the house off the builder and get a loan from the council under the condition that we don't sell the house for ten years if we do sell then we have to give our profits or a percentage of our profits back to the council depending in how long we stay in the house for the agreed ten years. A while ago we were offered a larger unfinished home for a lot less than what I believe to be the market value of our home and as I'm involved in construction I believe I could turn this around and take advantage of this situation. My question is if I were to sell my current home I would be selling it for less than the price that I paid for it and therefore I would avoid the claw back clause in the contract with the council making this probably an ideal time to be thinking of making the move but do I have to return the proceeds of the sale to the council and apply for a new loan from a bank/ building society or can I re-invest the money into our new home?
    As I've already said I'm in construction and even though our mortgage is not in arrears I'm under no illusion that any application from me to a financial institution would only lead to failure!

    You may avoid the claw back clause which is grand but you still need to be able to clear the council home loan with the sale price of the home. For instance if you owe €200k to the council and you only sell for €150k you will still owe them the shortfall of €50k.

    The claw back clause doesnt matter so forget about it as you wont be getting a profit on it so doesnt come into it.

    However the negative equity is an issue as the house will probably not get enough to clear the mortgage (or maybe it will but its a safe assumption if you bought in 2008 the property is worth a good deal less than the mortgage outstanding)


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    #3
    kev1.3s
    Registered Users Posts: 4,358 ✭✭✭kev1.3s


    Yes but I forgot to say that one of these houses sold recently for close to it's purchase price as these were "affordable" housing and at the time we were in a position to put down a reasonable deposit so I'm not to worried about the negative equity as yet, however if the economy keeps sliding I will be soon!
    But do I have to pay off the existing loan and then apply for a new mortgage on the new home?


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    #4
    chris85
    Registered Users Posts: 4,502 ✭✭✭chris85


    kev1.3s wrote: »
    Yes but I forgot to say that one of these houses sold recently for close to it's purchase price as these were "affordable" housing and at the time we were in a position to put down a reasonable deposit so I'm not to worried about the negative equity as yet, however if the economy keeps sliding I will be soon!
    But do I have to pay off the existing loan and then apply for a new mortgage on the new home?

    Yes you will have to clear the existing loan before getting approved on new one. They previously had bridging loans to bridge the gap but these are rare in these time as if an agreed sale falls through on your current property you will have trouble meeting both payments due so you will not get this.


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