How to use proceeds of old house sale shortly after buying new house?
"I've heard that the bank may agree to a ""one time adjustment"" to lower the payments on Mortgage #2 because of paying a very large payment. Is this something that really happens? It's to the banks advantage to reduce the payments in that situation.  If they were willing to loan you money previously, they should still be willing.  If they keep the payments the same, then you'll pay off the loan faster.  Just playing with a spreadsheet, paying off a third of the mortgage amount would eliminate the back half of the payments or reduces payments by around two fifths (leaving off any escrow or insurance).   If you can afford the payments, I'd lean towards leaving them at the current level and paying off the loan early.  But you know your circumstances better than we do.   If you are underfunded elsewhere, shore things up.  Fully fund your 401k and IRA.  Fill out your emergency fund.  Buy that new appliance that you don't quite need yet but will soon.  If you are paying PMI, you should reduce the principal down to the point where you no longer have to do so.  That's usually more than 20% equity (or less than an 80% loan).   There is an argument for investing the remainder in securities (stocks and bonds).  If you itemize, you can deduct the interest on your mortgage.  And then you can deduct other things, like local and state taxes.  If you're getting a higher return from securities than you'd pay on the mortgage, it can be a good investment.  Five or ten years from now, when your interest drops closer to the itemization threshold, you can cash out and pay off more of the mortgage than you could now.   The problem is that this might not be the best time for that.  The Buffett Indicator is currently higher than it was before the 2007-9 market crash.  That suggests that stocks aren't the best place for a medium term investment right now.   I'd pay down the mortgage.  You know the return on that.  No matter what happens with the market, it will save you on interest.  I'd keep the payments where they are now unless they are straining your budget unduly.  Pay off your thirty year mortgage in fifteen years." "Really this is no different from any kind of large lump sum and having a mortgage.  There are probably many questions and answers on this subject.  It really doesn't matter that the proceeds were the result of a sale, an inheritance would not change the answer. I think it is important to note that the proceeds will not eliminate the house 2 mortgage. A high level choice of investment one makes is between equity (such as stock) and debt investments (such as bonds and mortgages).  You are in a unique case of being able to invest in your own mortgage with no investment fee.  This may tip the scales in favor of paying down the mortgage.   It is difficult to answer in your specific case as we don't know the rest of your finances.  Do you have a sizable 401K that is heavily invested in stocks?  Do you have the need for a college fund?  Do you have an emergency fund?  Do you have a desire to own several homes generating income property? If it was me I'd do the following in order, skipping steps I may have already completed: I've heard that the bank may agree to a ""one time adjustment"" to lower the payments on Mortgage #2 because of paying a very large payment. Is this something that really happens? I really kind of hate this attitude.  Your goal is to get rid of the mortgage in a timely manner.  Doing such makes paying for kids college a snap, reduces the income one might need in retirement, basically eliminates the need for life insurance, and gives one a whole lot of money to have fun with."
How would I go about doing this? Assuming you had purchased the house by funding from your NRE account, you can easily move back the 30K into NRE Account and out of India from NRI Account. The 30K profit would be taxed in India as per capital gains and can only be moved into NRO account. A CA would need to certify that appropriate taxes have been withheld before the bank will release the funds for repatriation out of India. There is also a limit [large 1 million USD] on how much funds can be moved out of India. Consult a CA who would help you with the formalities. If you have not funded the purchase from NRE account, the entire proceeds should be into NRO account and then move funds from there. "There are basically two ways to get value out of an appreciating asset such as a home: (a) Sell it and take the profit. In the case of a home, you presumably still have to live somewhere, so unless you buy a cheaper home to replace it, this doesn't get you anywhere. If you can get another house that is just as nice and in just as nice a location -- whatever you consider ""nice"" to be -- than this sounds like a winning option. If it means moving to a less desirable home, then you are getting the cash but losing the nice home. You'll have to decide if it's worth it. (b) Use it as collateral for a loan. In this case, that means a second mortgage, home equity loan, or a home equity line of credit. But this can be dangerous. House prices are very volatile these days. If the value of the house falls, you could be stuck with debts greater than your assets. In my humble opinion, you should be very careful about doing this. Borrowing against your house to send the kids to college or pay for your spouse's life-saving operation may be reasonable. Borrowing against your house to go on a fancy vacation is almost surely a bad idea. The vacation will be over within a couple of weeks, but you could be paying off the debt for decades." I can't quite follow your question, so I'm proceeding under the following assumptions: - You paid £31,000 - Your partner paid £4,242 - You have at least one mortgage, which you both pay equally. If the relationship terminates, sell the property. You are reimbursed £31,000 and your partner is reimbursed £4,242. Any remaining proceeds from the sale are split 50-50. If the result is a net loss (i.e. you are underwater on your mortgage), you split the debt 50-50. If you are not both paying the same toward the mortgage, I'd split the profit or loss according to how much you each pay toward the mortgage. Of course, this is not the only possible way you can split things up. You can use pretty much any way you both think is fair. For example, maybe you should get more benefits from a profit because you contributed more up-front. The key thing, though, is that you must both agree in writing, in advance. This is reasonable; this is what I did, for example. Note that if the relationship ends, one or the other of you may wish to keep the property. I'd suggest including a clause in your written agreement simply disallowing this; specify criteria to force a sale. But I know lots of people are happy to allow this. They treat that situation as a forced sale from both people to one person. For example, if your partner chooses to stay in the house, he or she must buy the property from you at prevailing market rates. I cannot emphasize enough how important it is, when you buy a house with someone you are not married to, to make a legal agreement on how the money should be divided when you sell. I know it's too late for you, but I write this for anyone else reading this answer. From a legal point of view, if you made no agreement otherwise, you each own 50% of the house. If you want to divide it any other way, you will have to agree what an appropriate division is. Dividing according to the amount each of you paid towards it is a good way. Decide for yourselves if that means just mortgage payments, or also taxes, repairs, utilities etc. You should also be aware that if you have been living together a long time, like more than a year, some jurisdictions will allow one party to sue the other as if they were getting divorced. Then the courts would be involved in the division of property. There are ups and downs to doing this.  This isn't a taxable gain, because it's borrowed money that will be repaid. Whether there are restrictions or not depends upon your contract with the seller and your bank. If the concessions are for health & safety related repairs, your bank may require you to complete the work before closing or within a certain period of time. Overall: Upsides Downsides "Please Note: Before taking any steps towards a transaction involving possible capital gains tax exclusions, please consult your CPA, attorney or tax advisor. I am not a CPA or Tax Advisor. Since you have only lived in it 11 months, you don't meet the ""use test"" for full exclusion. However, even if you haven't lived in it that long, you may be able to exclude some of the gains due to a ""unforeseen circumstance"", not just because you wanted to move. You say you are ""ready for a change"" and so that means it's an arbitrary decision, not a forced one. To calculate the partial exclusion, take the number of months you lived there before the sale and divide it by 24. (11/24 = 0.45). So for an unmarried person, you can exclude up to $250,000. Multiply that by .45 and you get $112,500. If your profit after everything is taken out is only $35,000 then you can exclude that from capital gains because it is less than $112,500.  All that being said, you will need documentation in case you get audited. For more information, see IRS Publication 551, Basis of Assets, and look for the section on real property. See also this IRS Tax Topic on Sale of Your Home" "You should check with your broker for details, but you can generally specify which ""lot"" you are selling.  where I've seen it, that's done by concurrently sending a ""letter of instruction"" documenting your choice of lot concurrent with the sale, but different brokers may handle this differently.  I would think this should work for the case that you describe. (In addition, the default rule used by your broker is ""probably"" first-in-first-out, which will do what you want here.) Note that this may come into play even in a margin account to the extent that you might want to specify a lot in order to obtain (or set yourself up for later benefit of) favorable tax treatment under the long-term capital gains rules" First, this was never an arrangement for you to build equity, this was an arrangement for them to speculate on another house under the guise of teaching you a life lesson like responsibility or something contrived. The only way you profit from this is if the value of the house goes up and you sell it. You get 25% of the proceeds, maybe. If this was an equitable arrangement then they would be paying 75% of the property taxes and a little more for your maintenance efforts. "Edited: Pub 550 says 30 days before or after so the example is ok - but still a gain by average share basis.  On sale your basis is likely defaulted to ""average price"" (in the example 9.67 so there was a gain selling at 10), but can be named shares at your election to your brokerage,  and supported by record keeping. A Pub 550 wash might be buy 2000 @ 10 with basis 20000, sell 1000 @9 (nominally a loss of 1000 for now and remaining basis 10000), buy 1000 @ 8 within 30 days.   Because of the wash sale rule the basis is 10000+8000 paid + 1000 disallowed loss from wash sale with a final position of 2000 shares at 19000 basis.  I think I have the link at the example:  http://www.irs.gov/publications/p550/ch04.html#en_US_2014_publink100010601" "This comment is too long to put in comments. Sorry. I suggest you also do a dry run of your taxes with the rental as part of it. When you rent a house, you take depreciation each year. This means that even if you are breaking even, the rent paying the mortgage, property tax, etc, you may still show a ""tax loss."" In which case, planning and knowing this, might suggest you adjust your withholding so instead of a large refund, you get better cash flow each month.  Also, pull a copy of Schedule E and the Instructions. You'll be wiser for having read them.  Last. If you have decent equity in the existing house, it may pay to refinance to save a bit there, or even pull some cash out. When you buy the new one, you want to be in the best position you can be, and not risk cutting it too close." Using cash to purchase a home allows you access to certain deals that mortgage buyers cannot take advantage of.  These are typically distressed properties and need to be moved off the books quickly.  Think of things like foreclosures and auctions. This does not mean that it gives you an advantage with every house on the market.  While you may be able to close quickly, with cash, some buyers may choose to wait for the (presumably) higher offers of mortgage buyers.   There are complications to purchasing in cash then mortgaging to replace that cash.  Namely, how was that cash invested?  If one were in mutual funds or stocks, with the money, one will have to pay capital gains tax on any profit.  If those investments increase in value, during the time the money is tied up, what do you do then?  Do you buy at the higher value or hold it back and dollar cost average it in? The underlying investment is usually somewhat independent of your mortgage, since it encompasses a bundle of mortgages, and not only yours. It works similarly to a fund. When, you pay off the old mortgage while re-financing, the fund receives the outstanding debt in from of cash, which can be used to buy new mortgages. "In the Netherlands specifically, there are several reasons to pay extra off on your mortgage. First, house prices have dropped significantly in the last several years.  They are rising slowly now, but it's region specific and you can still borrow more than 100% of the price of the house.  Under these conditions, if you choose to sell your house and the outstanding mortgage amount is greater than the value of your house, you are left with a gap (restschuld) to finance.  I think the rules have changed recently around this, allowing you to finance this gap with a new mortgage, but this is not a good idea.  The tax implications of this are likely to be complicated in the long run and your new house may not cover this gap for some time. Second, the less you owe on your house, the lower mortgage rates you can get.  Mortgages in the Netherlands usually fall into categories based on percentage of the auction price at a foreclosure sale (executiewaarde).  If you pay more of your mortgage off, you may qualify for a lower interest rate, possibly making refinancing interesting.  This is especially important if interest rates continue to drop but the value of your house does not increase or even decreases. Third, if you choose to keep your house and rent it out, the banks in the Netherlands have very strict rules on this if you want to do it above board.  I've read that some banks require the mortgage amount (NB not the value you may have built up in a linked savings or insurance account) to be less than 50% of the foreclosure auction price (executiewaarde).  Also, related to point 2, if you have something other than a linear or annuity mortgage, you will need to refinance to do this as the tax advantages around savings mortgages ([bank]spaarhypotheken) do not apply if it is not used as your own residence. Finally, if you choose to sell and you are in the happy position of having the value of your house be greater than the value of your mortgage (you have an overwaarde), there may still be some obstacles.  Any value you have accumulated in a linked savings or life insurance account is not available until after you sell your house.  Extra value derived purely from the difference between mortgage value and sale price may be easier to deal with. EDIT: As a final note, I've made extra payments on both a ""Spaarhypotheek"" (linked life insurance) and a ""Bankspaarhypotheek"" (linked savings account).  In one, the principal paid each month reduced and the mortgage lifetime stayed the same.  In the other, the principal paid each month stayed the same and the lifetime reduced.  In both cases, interest payments were less each month.  I would contact your mortgage provider to understand what the expected impact of extra payments will be." "Not sure why the downvote - seems like a fair question to me. Who owns a house and in what proportions can be totally separate from who is named on the mortgage.  There are two ways to do this - one way would be for you loan them the money  first under a separate contract, which you should have a solicitor draw up; then they buy the house themselves. The contract would state the terms for repayment of the loan, which could be e.g. no repayment due until the sale of the house at which point the original amount is returned plus interest equivalent to the growth in value of the house between purchase and sale (or whatever). You'd need to be clear about what happened if the house lost value or they ended up in a negative equity situation. The other option is where you are directly a party to the purchase of the house and are named as part owners on the deeds. Again the solicitor who is handling the house purchase for them would help with the paperwork. In either case you would need to clear this arrangement with the mortgage company to make sure they were OK with it.  To answer your specific questions in order: - Yes, they would still be eligible for the Help To Buy ISAs (assuming that is what you are referring to) even though you would not be - I'm not sure what ""penalty"" you are referring to. You'd have to pay tax on any income or capital gain you made from the deal. - No-one can say whether this is a good deal for you without knowing a great deal more about your individual circumstances (and even then, any such advice you would get on here is worth as much as you pay for it.... if in doubt, consult an IFA.)" One piece of information you didn't mention is how much you paid for the original home.  If you hold onto that home for too long you will have to pay capital gains on the difference between sale price and original price. This can be a TON of money, thousands of dollars easily. The rule is: If you lived in a home for 2 out of the past 5 years, you don't have to pay the capital gains tax. So  if you just moved, you have 3 years to sell.  Perhaps as a compromise you can try renting it for 3 years and then selling it a few months before the deadline.