Sell or rent

JIMBO1970_2

Hi all. New user to forums, after some advice. Here is my position. Have a 2 bed house worth £75-80K paid off, am buying another for £150K. I would really like to keep first house as a pension, but would mean getting a mortgage and loan for nearly full amount of new house. Old house is in my name only, thinking of wife getting mortgage for new house, max allowed for her is 117K, then 30K loan for myself for rest.
Rental for old house will be about £375/mth, will take my earnings over higher tax bracket.
1/ Is it a viable investment to keep it, or just sell?
2/ Could I transfer old house to wife, she is on only 24K a year, so lower tax.
3/ What is a standard percent for letting companies?

Thanks in advance,
Jim.
:beer:

Rave

I'd sell it personally. Say you get £75k for it; that'll earn you £3675 a year interest in Martin's current best buy savings account, the Newcastle BS at 4.9%. That works out at just over £300 a month. A lettings agent would probably charge £50 a month, and then you've got to pay for insurance, repairs etc. and your rental income isn't guaranteed anyway, you may get void periods.

In fact, thinking about it, for tax reasons you're going to be much better off just putting the money towards your new houase purchase. You'd be taxed on the income from rent (or the interest earned if you put it in a savings account), but there's no tax relief on your mortgage payments. Also, with a low LTV, you should get a better mortgage deal.

Although it's tempting to want to keep your old property as a nest egg for your retirement, in reality prices are very likely to fall in the next few years and you would be far better off cashing in close to the top of the market. If your wife is on 24k and you (presumably, given your comment about the higher rate tax band) are on 30k-ish then you should be in a good position to pay off the 75k that would remain on your new mortgage quite quickly. With that paid off, you should have plenty of spare earnings to put towards a pension:).

Pal

If you decide to keep the property to rent it out, you should mortgage it with a BTL mortgage and then use the money to reduce the mortgage on the property you are actually living in by the same amount. You get tax relief on BTL mortgage interest but not on the mortgage interest for your own home.