100% Mortgages

Enygma

Hi everyone,

Not sure if this is the right forum or what.

I just read in the paper about 100% mortgages for first time buyers (http://www.mortgages.ie/100mortgages.cfm)

I was wondering, could I use this to buy a property, sit on it and sell it a year later at a profit?

I'm totally clueless here, so if there's something obvious I'm missing then let me know

Repli

Enygma wrote:

Hi everyone,

Not sure if this is the right forum or what.

I just read in the paper about 100% mortgages for first time buyers (http://www.mortgages.ie/100mortgages.cfm)

I was wondering, could I use this to buy a property, sit on it and sell it a year later at a profit?

I'm totally clueless here, so if there's something obvious I'm missing then let me know

If the property is not going to be your main residence, then when you sell it you will have to pay 20% Capital Gains Tax on any profit you make.. Also you are presuming property prices are never going to drop, it is unlikely to happen in the next year, but the possibility is there..

Enygma

Yes of course prices could drop alright. If I lived in the house would I have to pay CGT when I sold it on?

What costs are involved with selling a property?

antoinolachtnai

Well, to get in and get out of a property, you have surveyors' reports, solicitors fees, searches, stamp duty, bridging, moving in, maintenance, renovation, moving out, real estate agents' fees, more solicitors fees, mortage-breaking fees, moving out, VAT on fees. You also have to pay interest in the intervening period. All in all, you probably need a 15 percent lift at a bare minimum just to get your investment in moving expenses back.

Property is still a good investment, and some property will likely make further significant jumps in value. (That's just a view, of course.) The problem is to find available property which is going to have a jump in value in the short-term. Possible, if you really know your property, but definitely not easy.

Newaglish

Repli wrote:

If the property is not going to be your main residence, then when you sell it you will have to pay 20% Capital Gains Tax on any profit you make..

Not if he only has it for 1 year - the final year before selling the property is automatically counted as a period of residence, regardless of where you live at that stage

garred

^ yeah actually just found that out the other day.

Enygma if its your primary residence, no you don't pay CGT. If its a secondary (investment) property yes, after the first year.

nesf

I wouldn't go as far as to say that the price will drop in money terms. Everything I've read on housing bubbles and their bursting seems to indicate that what happens is that housing prices slow down and increase at a rate less than that of inflation, thus making their real value drop. The actual price doesn't, but meh, I'm no expert in this so don't take anything I say as gospel or anything.

shoegirl

nesf wrote:

I wouldn't go as far as to say that the price will drop in money terms. Everything I've read on housing bubbles and their bursting seems to indicate that what happens is that housing prices slow down and increase at a rate less than that of inflation, thus making their real value drop. The actual price doesn't, but meh, I'm no expert in this so don't take anything I say as gospel or anything.

Actually that is what appears to be happening at the moment. (And it happened in the 1980s too, but nobody talked about it).

But its still no guarantee that some properties in overdeveloped or structurally unattractive areas will not drop in actual figures - that can still happen, though it is less likely to.

soma

shoegirl wrote:

But its still no guarantee that some properties in overdeveloped or structurally unattractive areas will not drop in actual figures - that can still happen, though it is less likely to.

Well it's only a very very slight drop, but houses in the dublin commuter belt dropped 0.1% by the most recent measure.