Renting my house - crazy plan?

Fire_Fox

I used to rent shared houses in Cambridge, surely you won't be to to cover a £1300 mortgage by letting out the a tiny two bedroom house?? You would have to own in one of a select few streets in the city centre near the university to get anything like that kind of money in rental income! Victorian terrace to me says off Mill Road .... You are saying you can't afford to pay back the negative equity if you sell, but there is no real difference between a loan of £20K and a mortgage which includes £20K negative equity, other than to keep the house is a risky strategy when your mortgage is so high and interest rates are so low.

BitterAndTwisted

I would have thought that on a current joint income of £63k per annum you would be well-placed to be making over-payments on your mortgage and if you're not there must be something seriously awry with your budgeting or there's something else you haven't mentioned.

anselld

BitterAndTwisted wrote: »

I would have thought that on a current joint income of £63k per annum you would be well-placed to be making over-payments on your mortgage and if you're not there must be something seriously awry with your budgeting or there's something else you haven't mentioned.

I thought OP was clear that things are fine till September but then there is a problem, ie no job.

Fair enough with hindsight a 100% mortgage has bitten the bum, but that is now irrelevant, "we are where we are".

It is more of a lifesytle choice than a financial one. Fair enough, commute is the low risk option, but if the new job offer is a good one and OH can get a better job and you want to live together then I think it is perfectly responsible to explore all options.

It is not just a case of another wanbe BTL, OP realises I think that this is "damage limitation" rather than looking for a quick buck.

Seems to come down to a choice between "rent at a loss" or "live at a loss", and faced with that choice it must surely be worth considering how to make a better job offer workable.

BitterAndTwisted

A two-hour commute each way is not impossible although not everybody's ideal choice. Working two hours away and finding a Mon-to-Thurs lodging isn't ideal either but do-able as well.

Either of these options would be the only ones I would countenance as anything else would be far too risky.

cashorcheque

Thank you for all your replies - that is really helpful. Obviously, as one of the posters said, I'm not trying to make a quick buck - or any bucks, actually! I'm simply exploring all the options. And I'm aware that I can commute (as I said in my original post, I count myself lucky that either option is actually doable - it's just working out whether the option we would rather choose for our lives is likely to land us in huge financial problems). As I also said in my original post, we are financially fine and can pay our mortgage - it's just that I have to take this other job. We weren't greedy when we took our mortgage out - we had had a keyworker loan for our first property and made £14k but had to give back 30% of this to the loan company, which left us with not enough for a deposit. We thought it was sensible not to come off the property ladder, and we are happy to wait out the market now. We made sure that we could afford the repayments, and this is still fine.

Fire Fox - I don't think you read my post properly - I never said we would get enough to cover our mortgage from the rent. I said we have been quoted around £700, but that we would seek to rent a house to live in for less than that and save the difference in case something went wrong. We would also save another £150 a month, which we can afford to do, again in case something went wrong.

Thank you clutton - that was certainly a wake-up call in terms of having a management company. I think after reading that that, if we did decide to rent, it would be worth the money for a management company.

Are people suggesting that one option might be to take out a loan, sell our house, and pay off the equity with a loan? I know that's technically not allowed, but I know people do it and we have considered it. It just seems silly to sell a house at this time rather than hold onto it.

I'm not trying to be naive - i'm here to try and get all the information before we make any kind of decision.

clutton_2

""Are people suggesting that one option might be to take out a loan, sell our house, and pay off the equity with a loan? I know that's technically not allowed, but I know people do it and we have considered it.""

this would entirely depend on the %interest rates you are paying for your mortage and % rate you would pay for a loan....

if you do use an agent, please ensure they are a member of ARLA or RLA - even tho they may charge more (10-12.5-15%) you are are reasonably certain that they have done some training and know a bit about lettings - if you use an unregistered agent, (who has not been personally recommended by a friend you trust) you have no guarantees..

Even with an ARLA agent, legally the buck stops with you - so if the agent runs off with your tenants deposit - YOU get to reimburse the tenant out of your own pocket

that is why reading up is so important - here are some ideas for web browsing and reading

www.landlordzone.co.uk

property tribes forum

www.singingpig.co.uk

also Tessa Shepperson's book about renting (she is a solicitor specialising in LL&T legislation ) is really worth buying and reading...

whatever you do - do it because YOU are happy you have done your own research, not because any of us advise it......

if you have more questions after futher researching - do come back again....

cashorcheque

Thank you clutton - that is unbelievably helpful. It's a tricky choice but, as lots of people have said, our situation isn't a terrible one. It's just really useful to get other people's perspectives on it (and some useful reading material along the way).

Our mortgage is 6.79% fixed until September 2012. We currently owe £203k but have a 3% early redemption fee (going down to 2% this September, 1% the next, 0% after that). Unsecured loans for the amount we'd need seem (from moneysupermarket.com) to be at around 8%.

Best case scenario our house might fetch £200k. That is probably way over-optimistic. Worst £185k (the house next door is currently up for £195k - similar decor, etc). Let's say we managed to sell for £190k, 3% of which is £5700, we'd owe £208,700, and be in debt by £18,700 (say £20k including estate agent's and legal fees). Given that we can rent a two-bedroomed house in the new location for £600 a month, we'd be saving £675 a month on our mortgage. On our wages we could probably afford to pay £1000 a month if we really worked at it, so it would take us over two years to pay off the debt once you factor in interest rates, and another 2-3 years to save anything like a deposit.

In some ways it feels tempting to just cut our losses and take the hit. But it also seems like a bit of a stupid thing to do if we don't have to.

Thanks for the advice about letting agents. We have had quotations from Tucker Gardner, who are a well-established and well-respected agent around here (as you say, 12.5% a month) and Haart. We'd probably go with Tucker Gardner as they have much clearer information on their responsibilities and ours, and their fees seem absolutely standard.

Anyway, it's all food for thought. Thank you so much again.

clutton_2

do read the terms and conditions of letting very thoroughly indeed.... i have used agents now and again and some want you to pay them 1% of the sale prcie of a tenant they introduce subsequently buys yoru house ! blooming cheek

add up all the "extras" to see how much more it will cost you in inventory fees / agreement fees / admin fees /. inspection fees etc etc etc ... and negotiate them down ...

anything you dont like in the agrement ... cross it out, sign alongside... see what happens

i bet they just sign it without a word....

franklee

cashorcheque wrote: »

Our mortgage, on a very small Victorian 2-bed terrace with a tiny kitchen, is £1275 a month (bought on a 100% mortgage August 2007

cashorcheque wrote: »

Our mortgage is 6.79% fixed until September 2012. We currently owe £203k

Hi cashorcheque, I don't get your figures. Are you sure you've posted them all right? It sounds like your mortgage rate is nearer 5.79% not 6.79%? Are you on an interest only or repayment mortgage and for how many years was it? You seem to imply you purchased for about 203K or maybe a bit more? If you owed, 203000 for 25 years at 6.79% it's 1,148.64 pcm interest only and 1,407.68 pcm repayment.

cashorcheque

franklee wrote: »

Hi cashorcheque, I don't get your figures. Are you sure you've posted them all right? It sounds like your mortgage rate is nearer 5.79% not 6.79%? Are you on an interest only or repayment mortgage and for how many years was it? You seem to imply you purchased for about 203K or maybe a bit more? If you owed, 203000 for 25 years at 6.79% it's 1,148.64 pcm interest only and 1,407.68 pcm repayment.

Hi, we borrowed £207500, plus there's a £1500 arrangement fee on the account. We got the mortgage over 35 years, and it's a repayment.