Renting my house out, what would it cost me?

sundin13

Hi,

Our house is currently for sale, and we were hoping to buy another we'd seen, which would mean upping our mortgage from £95k to £155k.

I'm keen to move - so the kids don't have to share a room, so inlaws from abroad can stay for extended periods, so we have a garden while the kids are little and appreciate it etc.

Trouble is, it is going to be a stretch to get the place we want. And the house we've set our hearts on is still a bit of a compromise - its not ideal in every way, though its the best we can afford.

As I was browsing rightmove the other day, I ended up on the rental properties in our area - and realised that I could afford to rent something that would be perfect for us, that I wouldn't be able to afford to buy.

It got me thinking - what would the costs/process be for us to rent our current house out, hopefully to cover its costs (£605/month fixed rate mortgage), and for us then to rent somewhere for us instead.

And is this a stupid idea? Another consideration for me is that I am the major breadwinner (4xOH salary), but I work in the public sector, so the politicians have me a little scared of the large commitment that the new mortgage would entail.:eek:

Thoughts and opinions very welcome!

S13

Annisele

I don't think it's (necessarily!) a stupid idea, but it wouldn't be an easy solution.

If you get very unlucky, you'll find yourself househunting every six to twelve months because landlords want their properties back. In your position I'd seriously consider renting from somebody who has quite a few properties and actively chose to become a landlord, rather than from an 'accidental' landlord with only one property that they intend to sell as soon as they think the market has picked up.

As a start, you'd need consent to let from your lender. If you can't get consent from your current lender, you'd need to remortgage (probably on a BTL mortgage) with a different lender - and that might involve early repayment fees given that you're on a fix. What is your current LTV, and who is your lender? Other peeps might be able to give you an idea of how likely it is that you'd get consent to let.

You might also want to pop over to Landlordzone (google it); lots of experienced landlords over there.

sundin13

Thanks for the info...I'm with co-op, and have about 30% equity on a recent valuation.

property.advert

The main problem is that it is not your home. You are also going to lose out as property prices advance and that gap can never be recouped. Simply, if properties go up by 10%, then you make 10k on your 100k house but you "lose" 20k on the 200k house you live in and rent. To make the jump up now costs you another £10k, making it even more unaffordable.

The rent you pay increases but the rent you get from yours rises less, as it is the 100k house and not the 200k house. Eventually you can neither afford nor justify the rent you pay and you surely can never afford to move. What you suggest only has validity in a short term market or one where prices are falling and "coming towards you" rather then "going away".

If it is the best you can afford and moving a little in area will not give you a better house for your budget, then you have to accept that this is the best you can do and live with it. The kids need their own rooms for sure and that has to be a priority.

You could argue the threat of redundancy should stop you planning for a holiday or buying anything but the fact is that you just have to go after it and make the best of what is available. You have the finances to do it now, so go for it and worry about the what ifs and what maybes later.

Fire_Fox

property.advert wrote: »

The main problem is that it is not your home. You are also going to lose out as property prices advance and that gap can never be recouped. Simply, if properties go up by 10%, then you make 10k on your 100k house but you "lose" 20k on the 200k house you live in and rent. To make the jump up now costs you another £10k, making it even more unaffordable.

The rent you pay increases but the rent you get from yours rises less, as it is the 100k house and not the 200k house. Eventually you can neither afford nor justify the rent you pay and you surely can never afford to move. What you suggest only has validity in a short term market or one where prices are falling and "coming towards you" rather then "going away".

If it is the best you can afford and moving a little in area will not give you a better house for your budget, then you have to accept that this is the best you can do and live with it. The kids need their own rooms for sure and that has to be a priority.

You could argue the threat of redundancy should stop you planning for a holiday or buying anything but the fact is that you just have to go after it and make the best of what is available. You have the finances to do it now, so go for it and worry about the what ifs and what maybes later.

But by renting they save £5-10K on not having to sell and buy twice! You have forgotten that any larger house means larger bills, things will be a lot tighter in the large house if the OP gets made redundant or falls ill and cannot work. With renting they could simply give their tenants notice and move back to the smaller property.

Stetching yourself often does not work out - many people got repossessed in the nineties when interest rates went up, many more repossessed or in negative equity due to the current recession. Have you considered extending your current home Sundin? Are you perhaps running two cars but could manage with one?

sundin13

Fire_Fox wrote: »

But by renting they save £5-10K on not having to sell and buy twice! You have forgotten that any larger house means larger bills, things will be a lot tighter in the large house if the OP gets made redundant or falls ill and cannot work. With renting they could simply give their tenants notice and move back to the smaller property.

Stetching yourself often does not work out - many people got repossessed in the nineties when interest rates went up, many more repossessed or in negative equity due to the current recession. Have you considered extending your current home Sundin? Are you perhaps running two cars but could manage with one?

Sadly, our current house is already extended into the loft, and we don't have a garden or driveway to extend out into.

We do run two cars, it's true - but our second car is costing us about £1/day to tax and insure, and it probably saves us that as we can avoid using our bigger (thirstier) family car for single person journeys to work etc..

To be honest - right now we aren't stretched. Hence we can even consider taking on another £50k or so of mortgage. But with that £50k extra, we would definitely have less wriggle room.

googler

INto the figures above you need to factor contingency for the possibility of acquiring nightmare tenants in your existing place......

and the emotional discomfort of damage to 'your' house.....

Cardinal-Red

property.advert wrote: »

The main problem is that it is not your home. You are also going to lose out as property prices advance and that gap can never be recouped. Simply, if properties go up by 10%, then you make 10k on your 100k house but you "lose" 20k on the 200k house you live in and rent. To make the jump up now costs you another £10k, making it even more unaffordable.

The rent you pay increases but the rent you get from yours rises less, as it is the 100k house and not the 200k house. Eventually you can neither afford nor justify the rent you pay and you surely can never afford to move. What you suggest only has validity in a short term market or one where prices are falling and "coming towards you" rather then "going away".

If it is the best you can afford and moving a little in area will not give you a better house for your budget, then you have to accept that this is the best you can do and live with it. The kids need their own rooms for sure and that has to be a priority.

You could argue the threat of redundancy should stop you planning for a holiday or buying anything but the fact is that you just have to go after it and make the best of what is available. You have the finances to do it now, so go for it and worry about the what ifs and what maybes later.

Or, house prices can continue to fall once government subsidies stop, and the new, bigger house becomes even more affordable, while in the meantime you have saved money from your rental being lower and can use that to get a better LTV ratio and so cheaper borrowing.

sundin13

googler wrote: »

INto the figures above you need to factor contingency for the possibility of acquiring nightmare tenants in your existing place......

and the emotional discomfort of damage to 'your' house.....

I could probably deal with this. OH less so. I think I'm going very cold on this plan already...thanks to all the posters.

Cardinal-Red

I think by nightmare tenants you have to include the prospect of them not paying their rent on time, and the sheer amount of time it takes to evict non-paying tenants.

It's likely that your margins would be so small that even one month's missed/late payment could have serious consequences.

Consider also that your market rent will probably be subjected to a circa 10% reductin by your letting agency, not to mention their finders fee (some charge as much as 1 month's rent) and of course the cost of gas and electrical safety checks, energy performance certificates etc.