Moving and renting out current property?

PH1LL

Hello all,

We have a nice 2 bed flat in Cornwall but want to move closer to the sea. We bought our flat in March 2006 for a £119,000 with a 5% deposit.

In Augustb 2007 the flat was valued at £130,000.

The current mortgage is £116,500, the flat now is probably worth about £110,000. Our mortgage is a 30 yr open ended tracker mortgage at 0.59% above base rate on an interest only mortgage. We will at some point change it to repayment. We know the low rate is only short term so are throwing the extra money at clearing our credit cards and over drafts which should be gone in 3 months or so. We are saving for a deposit for a house and planning to buy in about 2-3 years.

Rental value is about £500 pcm. Ideally we would sell the flat and naturally move up the ladder but i dont see any point as we will loose money so we plan to rent it out.

We are ok in the flat but really want a bigger place closer to the sea.

What would you do stay put in flat or move to a rented house for £700pcm ish rent flat our for £500pcm?
Or stay put and throw all extra money savings for a deposit for house?

I know interets rates will hit c8% at some point which will mean topping up rent by about £250 per month but if all fails we can always move back to the flat.

Thanks

Phill

cupid_s

Have you spoken to your mortgage lender? This is the first thing you should do because your plan of renting the flat out may not be allowed by them. We are in a similar position to yourselves, we have a tracker 0.69% above base rate and would also lose money if we sold our house and moved so we wanted to rent it out whilst we moved to a bigger property.

Our mortgage provider said we could rent it out no problem but not on our current mortgage deal and we would have to switch to their BTL mortgage (a whopping 7.something% currently plus 1k arrangement fee). To do this we must have 20% plus equity in the house based on current values.

PH1LL

Hi Cupid.

I have not spoken to my Mortgage lender yet. Am still weighing up the options in my head.

What would happen if you were in a situation where you had to rent the property out but didnt have any equity or the 1k arrangement fee?

poppysarah

You'd have to stay put until you did have.
It's all very well saying you've not got th emoney for something when you want to rent out your flat. It'll cost you a EPC, gas cert and you might not get a tenant straight away. And what if your tenants need a repair doing?