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Confused about what happens if want to sell first house

  • 12-01-2021 11:07pm
    #1
    Jack566
    Registered Users Posts: 2 ✭


    Hi there,

    This is my first post so apologies if this is explained in other threads, I've had a look through and couldn't find the answer.

    I'm a first time buyer still looking for the right house, but confused about what happens if I sell the first house that I take out a mortgage for.

    E.g. (figures are just for illustration)
    Feb 1st 2021 Buy first house for 300k
    Deposit = 30k
    Take out 30 year mortgage of 270k for fixed rate of 3 years
    Monthly repayments = €1,120.
    Cost of credit = 130k
    Total loan repayment over 35 years = 400k

    Then March 2024 if I sell the house
    Monthly repayment total since took out the mortgage = 12 months x3 years = 40k
    Left on mortgage to pay = 360k
    Sell house for 325k

    There is a 35k discrepancy there between what is left on the mortgage to pay back to the bank (360k) and what the house is sold for (325k) or is it that if you are looking to break even I would have to sell the house for 360k?

    Appreciate anyone that has the time to take a look/explain further. Many thanks!
    Tagged:


Comments

  • #2
    yaboya1
    Registered Users Posts: 4,610 ✭✭✭yaboya1


    You borrowed 270k, so what's outstanding will never be higher than that.

    After 3 years of payments the balance would be roughly 250k, so if you sold for 325k you'd have 75k (excluding. selling costs etc.) to put towards your next purchase.


  • #3
    rn
    Registered Users Posts: 1,056 ✭✭✭rn


    I think you mixing fixed for 3 years v fixed for term of mortgage. In 2024 you move to variable rate mortgage so you repay just balance of mortgage on that date ~266k. Leaving you a balance of approx 60k to carry forward to your next house.


  • #4
    jt69er
    Registered Users Posts: 324 ✭✭jt69er


    Think the OP is confused about the cost of credit €130k, that is what credit would cost if it took 30 yrs to pay back loan. You borrowed €270k, not €400k.


  • #5
    [Deleted User]
    Posts: 5,121 ✭✭✭ [Deleted User]


    The total interest isn't calculated and added on at the start - it is charged on the outstanding balance.

    After three years you would owe about 252,000 on the capital.


  • #6
    Jack566
    Registered Users Posts: 2 ✭Jack566


    Thanks all, really appreciate the replies :) And yeah that's exactly it...I was thinking about this as in I'd be borrowing 400k not 270k...so that helps!

    I'm still not quite understanding how this figure is being reached:

    "After three years you would owe about 252,000 on the capital."

    So if I've paid 40k over 3 years then this would technically just reduce the capital by about 18k because I'm paying interest each month as well as what I owe on the loan is that it? (and I know this will vary a bit based on the bank you go with it and rates etc. but just so I understand the concept!)


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  • #7
    [Deleted User]
    Posts: 5,121 ✭✭✭ [Deleted User]


    Put the relative values into a calculator like this to see what will be outstanding over time.
    https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/


  • #8
    Geuze
    Registered Users Posts: 13,051 ✭✭✭✭Geuze


    Your repayment each month covers the interest bill each month, and knock a bit off the capital


  • #9
    Geuze
    Registered Users Posts: 13,051 ✭✭✭✭Geuze


    Jack566 wrote: »
    So if I've paid 40k over 3 years then this would technically just reduce the capital by about 18k because I'm paying interest each month as well as what I owe on the loan is that it? (and I know this will vary a bit based on the bank you go with it and rates etc. but just so I understand the concept!)


    Yes, some of the 40k repayments covers the interest bill.

    The rest of the 40k reduces the capital balance of the loan.


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