2nd home or rent?

AceCobra

Hello,
I would appreciate any advice given.
I’m in a position where I have to move home to be closer to work. In the current market (In N.Ireland) I don’t fancy the chances of being able to sell my house quickly so what I’m considering is;

1.[FONT=&quot] [/FONT]Renting my house, then renting another house closer to work, or;
2.[FONT=&quot] [/FONT]Renting my house and buying a smaller house closer to work.

What I would like to know is; Do I need any special permission to rent my home from my lender (Nationwide) and would I be liable for CGT on the rent which would just about cover the mortgage?
Am I mad to consider buying another house in the current climate? I am looking at small 2/3 bed new builds which have had massive price reductions from 200k down to 120-130k. I know these have been on the market some time and I would be offering even less. These are much smaller than my current home but the idea would be to sell both after a few years and buy something else. The main reason I am considering buying as the rental I’d be paying would be close to a mortgage on the amount I’d be borrowing. So, buytolet mortgages, I’m not very sure this would work for me as I’d be buying the house to live in? I am tied in for 5 years on my current home so getting out of that is going cost me a few pounds. My current property would be around £200k in today’s prices with 90k outstanding. Is it likely I could release the equity on this to buy the 2nd house?

I hope that makes sense and thanks in advance for any advice given.

Martin.

bandraoi

You already have one house you can't sell, why are you considering moving to a situation where you have two houses you can't sell?

AceCobra

Well it's not that I can't sell, it's that'll it'll take some time which I don't have.

However one thing is constant, I have to move.
I thought that the idea of buying a house for the same or maybe even less than it would cost me to rent may have some merit? Also assuming at some point house prices will begin to rise again? Failing that if the world fell apart and the new house became worthless overnight it would still have a rental potential for around the mortgage amount? It is most certainly a buyers market at the the moment if the right price can be struck.


In any case I wasn’t really seeking advice on the merits of buying it was more so the logistics of the finances etc although thank you for your comment.

Martin.

PasturesNew

QUIZ TIME

I love logic questions and I've put together this simple logic test to find out which planet people are on:

Q: "If a house loses £3,000 per month every month for 5 years, how many would a rational person need to own to have a happy life?"

A: ________________

Clue: http://www.guardian.co.uk/money/2008/sep/04/houseprices.property

alared

Usually building soc/banks like to be informed that you are renting your house out so they can charge you a rip-off fee for the previlage.
Personally I wouldn`t tell them.
As regards the tax,capital gains doesn`t come into it about the rental income.
You would need to inform the taxman about the rental income BUT this can be off set against the mortgage payments.
Can`t see the point of buying a second home when you still have a mortgage on the first one to pay off.

AceCobra

I can see I'm wasting my time here.

I had foolishly thought there were some people left on the boards who actually tried to advise people, now I release it has descended into abusing anyone who even considers buying.
I’m not looking to buy another house for profit, I’m not a developer, I HAVE to move house to be closer to work. I was merely interested to find out how it would work if there was any merit for buying as opposed to renting as the outgoing’s would be similar.
Thanks for your time.

Martin.

PasturesNew

Now my answers

AceCobra wrote: »

1.Renting my house, then renting another house closer to work, or;
2.Renting my house and buying a smaller house closer to work.

3. Selling your house at what seems right now to be a low price, then renting closer to work for 2-3 years.

AceCobra wrote: »

Do I need any special permission to rent my home from my lender (Nationwide) and would I be liable for CGT on the rent which would just about cover the mortgage?

Yes. They might make you take out a BTL mortgage, costing more, they might say "no" as your rent is not high enough compared to your interest only mortgage amount.
You will only pay CGT if when you sell the house there is a profit. Then you get a tax free amount anyway. It is unlikely that you would make a profit even if you rented it for 10 years. There's more to it than that, but you do not need CGT to even enter your vocabulary in this market/at the prices they are and will be.

AceCobra wrote: »

Am I mad to consider buying another house in the current climate? I am looking at small 2/3 bed new builds which have had massive price reductions from 200k down to 120-130k. I know these have been on the market some time and I would be offering even less. These are much smaller than my current home but the idea would be to sell both after a few years and buy something else. The main reason I am considering buying as the rental I’d be paying would be close to a mortgage on the amount I’d be borrowing. So, buytolet mortgages, I’m not very sure this would work for me as I’d be buying the house to live in? I am tied in for 5 years on my current home so getting out of that is going cost me a few pounds. My current property would be around £200k in today’s prices with 90k outstanding. Is it likely I could release the equity on this to buy the 2nd house?

Yes, mad.
You know you don't want a smaller house.
You've been sucked into thinking £120-130 is a good price but they'll go lower
What makes you think you'll be able to sell again after a few years - and remember it costs £10k to move.
You can't have a BTL mortgage on a place you are living in.
You are tied in because you had a discount on the real cost, it will cost you more to keep waiting it out. But do the figures, find out how much it will cost.
Why own two houses that are both going down in value? It's more than double the risk. 2+2=6

[/quote]
Seriously though, house prices have dropped, but the market is dire. A house/mortgage right now is a millstone round your neck and financially all you can see is your perceived "loss". Only the "gain" was only ever an illusion. Sell now at a price that will make it attractive in today's market. Bank the money and rent conservatively closer to your work. By conservatively I mean don't touch your house equity at all. Leave that to continue to accumulate. Use only your job income to rent, don't rent something palatial/to impress others, but squirrel away as much money as you can.

The next 5 years is your window of opportunity to save yourself the biggest nest egg ever and in the coming years you could find your next property is entirely mortgage free if you work hard just once. Just once in your lifetime. This is YOUR chance to free yourself forever.

Good luck, whatever you choose.

AceCobra

Thanks Alared, appreciate the comments. I'm beginning to think renting mine then renting another is the way forward but I just doesn't seem right as the payments would be similar. I suppose I’m be glad of it if house prices keep falling, but if they go up I can’t help thinking I may make the wrong decision.

Martin.

PasturesNew

AceCobra wrote: »

I can see I'm wasting my time here.

I had foolishly thought there were some people left on the boards who actually tried to advise people, now I release it has descended into abusing anyone who even considers buying.
I’m not looking to buy another house for profit, I’m not a developer, I HAVE to move house to be closer to work. I was merely interested to find out how it would work if there was any merit for buying as opposed to renting as the outgoing’s would be similar.
Thanks for your time.

Martin.

You are not wasting your time. You are just receiving responses you don't want to hear.

My situation: last June I sold a house and banked the money. I now live in a rented bedsit, waiting my time.

I sit here, never having to worry that some tenant in a house I own is going to stop paying the rent, will want something fixing, is trashing the place, etc. I sit here with my equity safe in the bank (well, safe as it can be), growing interest. I sit here completely carefree of any property obligations for maintenance and having to worry each month as the prices drop.

The situation the world/banking are in at the moment is almost unprecedented. Things will be getting worse. Time to batten down the hatches.

Do the maths. Do a spreadsheet.

alared

AceCobra wrote: »

Thanks Alared, appreciate the comments. I'm beginning to think renting mine then renting another is the way forward but I just doesn't seem right as the payments would be similar. I suppose I’m be glad of it if house prices keep falling, but if they go up I can’t help thinking I may make the wrong decision.
Martin.

One mortgage is enough for anybody at the moment.
If prices do start to rise (in about six years time,maybe),your own house will also rise in value too,so it`s not as if you don`t already have a foot on the ladder.
IMO:
Rent your house out but don`t tell Nationwide.
Rent a place near to your work and sit back and see what develops.

Nosht

AceCobra wrote: »

Hello,
I would appreciate any advice given.
I’m in a position where I have to move home to be closer to work. In the current market (In N.Ireland) I don’t fancy the chances of being able to sell my house quickly so what I’m considering is;
1.Renting my house, then renting another house closer to work, or;
2.Renting my house and buying a smaller house closer to work.
What I would like to know is; Do I need any special permission to rent my home from my lender (Nationwide) and would I be liable for CGT on the rent which would just about cover the mortgage?
Am I mad to consider buying another house in the current climate? I am looking at small 2/3 bed new builds which have had massive price reductions from 200k down to 120-130k. I know these have been on the market some time and I would be offering even less. These are much smaller than my current home but the idea would be to sell both after a few years and buy something else. The main reason I am considering buying as the rental I’d be paying would be close to a mortgage on the amount I’d be borrowing. So, buytolet mortgages, I’m not very sure this would work for me as I’d be buying the house to live in? I am tied in for 5 years on my current home so getting out of that is going cost me a few pounds. My current property would be around £200k in today’s prices with 90k outstanding. Is it likely I could release the equity on this to buy the 2nd house?
I hope that makes sense and thanks in advance for any advice given.
Martin.

Go ahead & follow your instincts. This is exactly what I am doing.
I am keeping my current house & letting it out to cover the existing mortgage plus extra which is going towards paying nearly half of my new mortgage on a lovely little cottage that I bought for a song.
I have "done the math", researched the market & other options & can honestly say that it is a "no brainer". If the worst comes to the worst & say property prices collapse by 50% then everyone is in the same boat & you still have the residual value of your current home to fall back on.
You are legally obliged to inform (or more accurately ask) your existing mortgage provider for permission to rent out your property but, in reality, if you continue to make the regular payments then they need never know about it & there has never been a case of withdrawal of mortgage caused by this non-disclosure.

Regards,

N.