Costs of selling your home
You may make a lot of money selling your home, but you will also spend quite a bit as well. This page outlines the costs involved when you sell your home and explains what you can do if you buy a new home before the sale of your old home is completed.
Costs can include:
cleaning, repairs and decorating to prepare your property for viewings
cost of preparing a home report
estate agent's commission (this can vary from 1.5 to 4 per cent of the selling price plus VAT)
advertising costs if you're marketing the property yourself
mortgage redemption fees if you are planning on paying up your mortgage early
Costs of buying a home
In addition, you may also need to take into account the costs of buying a new property.
When you are moving home, you may find that you need to come up with the money for your new home before the sale on your old home is completed. Unless you have enough ready cash to pay for your new home outright, you'll probably need to get a loan to cover the overlap. This is known as a bridging loan, because it bridges the gap between the purchase of your new home and the sale of your old home.
Where do I get a bridging loan?
Most financial institutions offer bridging loans. If possible, it's probably quicker and easier to arrange one with your mortgage lender.
How do bridging loans work?
When you take out a bridging loan, you are in effect taking out a second mortgage secured on your old home. For example, if you are buying a home that costs £90,000 and have £10,000 to pay as a deposit, you will need to borrow the remaining £80,000 in order to make up the shortfall. Your lender will advance you this money on the understanding that when you sell your home, you'll be able to pay it back.
You will have to pay interest on the loan until you sell your old home. Your lender may charge a higher rate of interest for the loan than they charge on your mortgage, and you may also have to pay an arrangement or management fee. Once your home is sold, you can pay back the loan.
How much will it cost?
If the gap between buying and selling properties is short, you shouldn't have to pay too much for your bridging loan.
However, if it takes a long time to sell your old home (for example, if the sale falls through) bridging loans can end up being very expensive, depending on the size of the loan and the interest rate charged.
Capital gains tax
You may have to pay capital gains tax if:
the property you are selling is not your main home (for example, if it has been rented to tenants or is a holiday home), and
the property has risen in value since you bought it.
How is capital gains tax worked out?
Capital gains tax is complicated. Roughly, it can be worked out as:
the proceeds of the sale
minus the original cost of the property
minus selling costs and the costs of any improvements
minus a tax free allowance of £11,500 (for the 2017/2018 tax year)
minus any other tax relief (for example you may get some tax relief if you used the property as a business premises but lived there as well)
minus taper relief (this reduces the amount you will have to pay tax on depending on how long you have owned the property).
The sum left over is added to your income and taxed at 18 per cent.
You will not have to pay capital gains tax if:
the property was your only home for the entire time you owned it, and
you used it as your home all the time that you owned it, and
you did not use it for any purpose other than as a home for yourself, your family and no more than one lodger for the entire time you owned it, and
the house and garden are no bigger than 5,000 square metres (this is roughly the size of a football pitch).
Even if you don't meet all these conditions, you may still be entitled to relief against all or part of the gain, for example, if you had to live away from your home temporarily because of your work, or if you used part of the home as business premises and lived in the other part.
Last updated: 31 July 2017
Housing laws differ between Scotland and England.
This content applies to Scotland only.