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41% of homes sold at a loss

Around 41 per cent of homes sold since the UK housing market peaked six years ago have sold at a loss, according to new research.

If you bought a property after the credit crunch began in 2007 and have since sold it, there is a good chance you lost money on the deal.

Home finance firm Castle Trust found that 41 per cent of homes sold since 2007 have gone for less than the vendor originally paid.

The firm’s research found that the average loss was just under £25,000.

Anyone who has bought a home in the last few years and now needs or wants to move may face a similar situation.

Reasons for selling home at a loss

There are a number of reasons why you may be unable or unwilling to wait until house prices in your area rise before putting your home on the market.

For a start, if your property has lost value, there is a good chance that others will be in the same position.

If this is the case and you may be able to get a new home at the right price.

Castle Trust said that 18 per cent of those who sold at a loss fell into this category.

Relocation, relocation, relocation

Divorce or separation was the reason for 14 per cent of loss-making sales.

Meanwhile, 13 per cent said they needed more space and 12 per cent had to move because of a change of job.

Sean Oldfield, CEO of Castle Trust, says: "Since the downturn, over 130,000 families have made a loss on their home placing them under enormous financial and emotional pressures.

"When you take into account the costs associated with moving home, from stamp duty to solicitor’s fees, this situation becomes even worse."

No more double-digit property price growth

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "Selling your home for less than you paid for it is never ideal.

"While most of us have come to terms with the fact that double-digit house-price growth is a thing of the past, the expectation is still ingrained in us as a nation that we can, and should, make money from property.

"If nothing else, it enables us to move up the housing ladder more quickly than we would otherwise be able to.”

So if you have to move but your home is worth less than when you bought it, what are your options?

Options when selling your home at a loss

Harris says that the first issue to look at is whether the property is worth less than the outstanding mortgage – known as being in negative equity.

"If the value of the property has fallen so much that you have nudged into negative equity, you will have to make up the shortfall to your lender when you sell up," he explains.

"If you have savings or other assets you could realise, this might be one way of doing this."

You may still be able to move even if you are in negative equity and can’t pay off your original loan.

David Hollingworth at mortgage broker London & Country says: "One or two lenders like Lloyds and Nationwide offer existing borrowers help with negative equity allowing the mortgage to be taken to the new property."

If you aren’t in negative equity, it will be easier to move – but you will have in effect lost some of the deposit you originally put down.

Look at renting

Harris adds that renting out your home and finding somewhere to rent in the area you need to move to could be an alternative solution.

"The idea is that the rental income will cover the mortgage until the time comes when property prices have recovered so you can sell up at a profit, or at least not a loss."

Harris says that you will need to ask your current mortgage lender for consent to let, or risk breaching your mortgage contract.

Hollingworth adds: "It's important to assess the property as a long-term investment.

"Make sure that it will appeal to tenants in order to avoid voids in the tenancy which could put real pressure on monthly affordability. 

"There could also be other costs including management fees as well which should be factored into your budgeting."

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Chris Torney

Chris Torney

Chris is the former personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris

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