Let to buy or sell and buy

dynamicsjon · 9 October 2016 at 3:29PM

Hello

We have a house (value about £200k-£230k, mortgage £160k) which we now rent as we have moved to the other side of the country for work.

We are paying £1000 in rent and looking a house prices slowing rising as the town has a massive build of new houses and people coming to live here.

We want to live here long term.

We have no savings or debt apart from the above mortgage.

We are being told we need to raise about £30k to buy a 2nd house here (value £250k).

We are late 40s with no pension.

MY QUESTION IS:
Should we sell the first house and buy here before house prices/rents rise further OR keep renting and get a 2nd mortgage as soon as we can.

Thanks for any advice, help or anything that would help :-)

Jon

Pixie5740 · 9 October 2016 at 3:36PM

Does the £30k also include the £10k SDLT you'd need to pay?

Thrugelmir · 9 October 2016 at 3:44PM

Where's the deposit for the new property going to come from if you don't sell the existing property.

Can you afford to service both mortgages and related property costs if the need arises. Letting property can be highly profitable. However when it goes bad. Can be financially disastrous. Only speculate with what you can afford to lose.

dynamicsjon · 9 October 2016 at 3:53PM

Thanks for the replies, guys.

@Pixie5740 no - so will need to look at £40k

@Thrugelmir - we will need to save the new deposit, etc.

Just to note the 1st house has a flat and house with a rental income of £1,200 a month.

So should I keep saving to try and buy house number 2 as interest only rather than renting seems to be about £300 cheaper per month.

As we don't have much to loose to start with !

Thrugelmir · 9 October 2016 at 3:58PM

dynamicsjon wrote: »

So should I keep saving to try and buy house number 2 as interest only

Few interest only deals available. Those that are tend to have low LTV requirements along with a scheduled repayment plan.

dynamicsjon · 9 October 2016 at 4:13PM

OK - so sounds like I am better selling the house and buying a new house with any equity we get from it ?

Pixie5740 · 9 October 2016 at 4:28PM

To get a LTB mortgage on your existing property you're looking at a max LTV of 75% so you even using the higher valuation you won't be able to release £30k never mind £40k.

Interest only mortgages are thin on the ground these days so you're more likely to be looking at a repayment mortgage for the place. Plus keeping hold of the existing property means your SDLT jumps from £2.5k to £10k. Your gross rental yield is 6 or 7% depending on which valuation you use which is not bad. However, if you're a higher rate tax payer you'll find your net rental yield falling soon.

By all means discuss your options with a broker but on the face of it selling the existing place and buying somewhere new seems to be the best option.

Pixie5740 · 9 October 2016 at 4:29PM

Does your employer offer a work place pension? It's free money for you.

dynamicsjon · 9 October 2016 at 4:35PM

Thanks again @Pixie5740 - very useful feedback :-)

I didn't consider your points - very helpful - seem like the landscape is getting more difficult for letting. I am now also thinking just 1 house is best !

I work for my own limited company (wife and I employed) and earn £30k-40k a year, so not sure about workplace pension position with that.

Let to buy or sell and buy

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