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    • T-Sil
    • By T-Sil 11th Jan 18, 10:38 PM
    • 161Posts
    • 516Thanks
    Advice on whether to sell/rent out and second property!
    • #1
    • 11th Jan 18, 10:38 PM
    Advice on whether to sell/rent out and second property! 11th Jan 18 at 10:38 PM
    Hi All,

    We are really in need of some advice on our current situation & seem to keep going round in circles about what is best to do.

    We own a house (A) in Surrey (4 bed semi detached) worth 575k, mortgage of 350k.

    However we would like to relocate back up North to Yorkshire and have seen a house (B) we love/want to buy at 600k.
    We have access to about £200k to put towards the new house up north, without having to sell our house in Surrey.

    The scenarios are this:

    1. Rent out house A in Surrey for around £1650 a month. Mortgage payments are £1415. Buy new house B up north with mortgage payments of around £1600 a month, but also having to pay double stamp duty (an extra 20k!)

    2 Sell house A in Surrey, combine the equity with our deposit -total around 350-400k, buy house B with a smaller mortgage of around 250k, mortgage payments approx £850 a month. Then in a year or two buy a smaller flat as an investment.

    Does anyone have any advice on which option would be better? I know it all depends what we want to do but it's hard!

    The house is Surrey is more likely to go up in value than the house up North, and as a long term investment could pay off for our retirement, but then there's also a lot of stuff to deal with renting out a big house with a lot of money tied up in it.

    We really need some help to make a final decision and I'm sure there are things we haven't thought of.

    I know about the tax implications and changes to the law regarding buy to lets in 2019.

    Thank you
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    • Bimbly
    • By Bimbly 12th Jan 18, 8:01 AM
    • 43 Posts
    • 35 Thanks
    • #2
    • 12th Jan 18, 8:01 AM
    • #2
    • 12th Jan 18, 8:01 AM
    I don't think you have enough equity in your house to make renting it out worthwhile. Buy to let mortgages usually like you to have rental income of 125% of mortgage. Your figure is 116% (by my calculation).

    You could have vacant periods where you have no tenants where you will need to cover the mortgage with no rental. There is ongoing maintenance to be paid for (if the boiler needs replacing, that's a big chunk of £££). You may get great tenants, but then again you may not. Mortgage rates are low at the moment, what if they go up?

    Are these figures you have provided the cost of a BTL mortage? Or are they residential? Because BTL mortages are more expensive. Your residential mortage lender may give you consent to let, but I don't think you can hold two residential mortages, so you'll have to swap it to a BTL anyway.

    In financial terms, I don't think the figures stack up. The only reason to keep the house on is if you are hedging your bets and want to keep it in case you want to move back to Surrey. I rented my house out while I lived elsewhere and it was ok, but I had a couple of vacant periods which were a bit too long for comfort and when I finally got great tenants, it was awful to ask them to leave after five years. I also had to pay tax on the profit.

    Watch out, also, for capital gains on the house when you come to sell.

    Financially, you would be better off using money from the sale of the house to invest elsewhere. How about some stocks and shares ISAs? They're tax efficient. If you're still working, then you get big tax incentives investing into a pension -- either pay more into a work scheme or set up an extra SIPP. That really is saving for retirement.

    If you want to invest in property too, then a smaller place could work, but you might not want to put all your investment eggs into the property basket.
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