Clueless!

Bogbean

Will try to be concise....

I own a small BTL which I only have because it had dropped so much in value that, when I remarried, we kept it and spent less on our marital home rather than lose too much on it. It has a 110k interest only mortgage and is now worth approx 160k (from 187k).

We now want to buy our "home for life". People seem to think always best to keep the BTL but my dilemma, not least because I am fearful of debt and being short of money, is this.....do we sell the BTL which enables us to get a better home for life or do we compromise on new house to avoid early repayment penalties, maximise profit in longer term on BTL etc. At 42 I don't want a big/long mortgage if possible nor do I want to live on baked beans to get a Dallas style home - I'm actually after a modest cottage but country living around Bristol/Gloucs isn't cheap!

My preference is to only own one home but this is because I like things simple rather than an educated financial move. My logic is that it's surely better to sell BTL and pay penalty to increase my deposit (currently deposit is about 30-40%) than take a big mortgage, risk being tighter for cash and then sell BTL eventually at a loss as it is unlikely to reach the giddy heights I paid in 2007 anyway.

I hope this makes sense and is enough info. Any advice appreciated.

Helen

Cannon_Fodder

How long until the ERC runs out?

How much is the ERC?

If a larger deposit (using the equity of the BTL) would reduced the Loan-To-Value of your dream home, and therefore fall into range of better deals, then do the maths on the length of that deal/improvement of rate, and see if it 'repays' the ERC, effectively.

Whether the difference between the dream home and a satisfactory home, is worth the ERC on its own, is down to personal preference - which I sense you are leaning towards anyway.

By selling the BTL you are crystalising your losses. But it could be argued that if there is house price inflation for the next X years, a 'dream home' type property will outstrip a 'small BTL' in performance.

Therefore, you can view the "BTL proportion" of the dream house's future equity gain as replacing your BTL equity loss since 2007, over time - and possibly quicker.

Unless you are seriously profiting from the rent versus BTL mortgage, of course.

Bogbean

Cannon_Fodder wrote: »

How long until the ERC runs out?

How much is the ERC?

If a larger deposit (using the equity of the BTL) would reduced the Loan-To-Value of your dream home, and therefore fall into range of better deals, then do the maths on the length of that deal/improvement of rate, and see if it 'repays' the ERC, effectively.

Whether the difference between the dream home and a satisfactory home, is worth the ERC on its own, is down to personal preference - which I sense you are leaning towards anyway.

By selling the BTL you are crystalising your losses. But it could be argued that if there is house price inflation for the next X years, a 'dream home' type property will outstrip a 'small BTL' in performance.

Therefore, you can view the "BTL proportion" of the dream house's future equity gain as replacing your BTL equity loss since 2007, over time - and possibly quicker.

Unless you are seriously profiting from the rent versus BTL mortgage, of course.

Ooo I didn't know ERC (took me a while to figure that acronym) had a timeframe. Will go and look. I make less than £100/mth on rent on BTL.

Thank you *goes to find paperwork*

Bogbean

ERC end date is 30 Jun 2011. I don't appear to have much mortgage info - possibly because it was ported over from marital home when we divorced so I'd best get a copy of Offer of Loan from NR. Thanks for exposing that oversight for me!