Should we sell or rent it out?

NoAngel

Hi All,

After some advice about selling/buying.

I live with my boyfriend in his house. It was bought 4 years ago with a 95% mortgage and probably has no equity in it now. He paid £105,000 for it and it is probably worth £95,000 now. He owes around this on the mortgage. The repayements are £550 per month.

I have accepted a job 250 miles away and I am due to start in October. We're a bit stuck about what to do now.

We thought about keeping the house and renting it out- however houses such as this are only getting about £400pcm. Would we need to do anything about the mortgage if we were to rent it out?

We could sell it and buy another property- with both of us on the mortgage maybe as I earn a good salary. The current mortgage has another year left.

Does anybody have any advice about our options here?

Bermuda_John

change the mortgage to interest only andf then rent it out.

Jowo_2

It would require permission from the lender which they may not consent to if there's no equity in it.

You would also have to consider the effects of Capital Gains Tax if it is let out in the long term.

The landlordzone website is the best source of info for you to understand your regulatory/legal obligations, plus the tax situation (which expenses are tax deductible).

Without agency fees, repair fees and voids, you are already £150 down per month...If there is a long void or non-paying tenant, can you afford to subsidise this in full?

cat10_2

NoAngel wrote: »

Would we need to do anything about the mortgage if we were to rent it out?

Your lender may insist on changing the status of the mortgage to a But to Let.

Like Jowo has said the main risk will be being able to afford to cover the mortgage payments if you have to go several months without a tenant.

BitterAndTwisted

Or maybe have a tenant who stops paying the rent, trashes the place and it take you 4-6 months to evict them. Meanwhile you're under a legal obligation to carry out any repairs that need to be done. I know what I'd do and it wouldn't be becoming a landlord with zero experience who also lives 250 miles away

skint-student-nurse

we had a similar problem...my OH owns a flat and we ended up renting it out due to the market at the time.

you would be best trying to find an agent who would offer a full management service but this service can make a big dent in the final amount you recieve every month but they would obtain quotes for repairs on your behalf and get the work done for you. you would also need an EPC,gas and electric checks.

BUT being a landlord is easier said than done,we are very close to the property we rent out and we have had no end of problems with a tenant who was late moving out and has done more damage than what the deposit covers,switched the electric and gas meters to prepayment ones without permission and lots,lots more besides,and now we face a 2 month void while the repairs are done.

as jowo pointed out, try the landlordzone as it is a very useful source of information. but,if you do let it out,defanitly get consent to let before getting a tenant in there.

NoAngel

Thanks! wow- very put off trying to rent it out now. Those are things I'd thought about but not seriously considered.

Sooo- if we have little equity in it would it be viable to try and buy another house of similar value and try and sell this one? OH would have to live in it and keep his job up here until it sells, which we both realise. I'd go down there and live in the staff accommodation until we had it sorted. Would we still need to sort out a deposit to move?

dopester

NoAngel wrote: »

Thanks! wow- very put off trying to rent it out now. Those are things I'd thought about but not seriously considered.

Sooo- if we have little equity in it would it be viable to try and buy another house of similar value and try and sell this one? OH would have to live in it and keep his job up here until it sells, which we both realise. I'd go down there and live in the staff accommodation until we had it sorted. Would we still need to sort out a deposit to move?

You could also sell and then rent in the new area.

Purchasing is not obligatory. You've already seen it happen once... your BF buying at £105,000 four years ago, with property now worth around £95,000 (according to you). Would you like some more of that falling value with your next house purchase?

And that after 4 years of mortgage repayments (using your £550 x 12 months x 4 years = £26,400)

Assuming that you get £95K for his house, more likely than not, you'd also need a deposit if you wanted to buy a new home. (Unless you buy though one of the Shared Ownership crazy schemes.) Got that deposit money saved?

We're in times where it's an advantage to be able to move for jobs, and owing can be a right drag. Renting doesn't make you a second-class citizen. Furthermore, there are many economic forecasters who believe rent values are going to start seriously falling. That might also include the rentable value of your bf home in the future.

Achievable rent levels can also fall (they are not set in stone), depending on money in the economy, how economy is faring, local job opportunities and prospects ect.

Fire_Fox

NoAngel wrote: »

Thanks! wow- very put off trying to rent it out now. Those are things I'd thought about but not seriously considered.

Sooo- if we have little equity in it would it be viable to try and buy another house of similar value and try and sell this one? OH would have to live in it and keep his job up here until it sells, which we both realise. I'd go down there and live in the staff accommodation until we had it sorted. Would we still need to sort out a deposit to move?

Do either of you have any savings? If not you need to look at scaling down your lifestyle. You'd need a 10% deposit on a new house plus no debt - if you sell at £95K you will have £10K negative equity plus estate agents, removals and legal fees. IMO it's madness to buy without three months mortgage payments put aside in case the worst happens. You probably won't get a favourable mortgage until you have both been in your new jobs a few months. Can't your OH just move into the staff accommodation whilst you save up?

NoAngel

dopester wrote: »

You could also sell and then rent in the new area.

Purchasing is not obligatory. You've already seen it happen once... your BF buying at £105,000 four years ago, with property now worth around £95,000 (according to you). Would you like some more of that falling value with your next house purchase?

And that after 4 years of mortgage repayments (using your £550 x 12 months x 4 years = £26,400)

Assuming that you get £95K for his house, more likely than not, you'd also need a deposit if you wanted to buy a new home. (Unless you buy though one of the Shared Ownership crazy schemes.) Got that deposit money saved?

We're in times where it's an advantage to be able to move for jobs, and owing can be a right drag. Renting doesn't make you a second-class citizen. Furthermore, there are many economic forecasters who believe rent values are going to start seriously falling. That might also include the rentable value of your bf home in the future.

Achievable rent levels can also fall (they are not set in stone), depending on money in the economy, how economy is faring, local job opportunities and prospects ect.

If we sold now and didn't buy another house- then surely we'd have nothing to show for all that mortgage already paid? This is why it's such a dilemma We may as well have never bought in the first place and rented somewhere like this for £400pm and saved a fortune. I always imagined that once on the property ladder we'd stay on it.

Thanks for the advice!

NoAngel

Fire_Fox wrote: »

Do either of you have any savings? If not you need to look at scaling down your lifestyle. You'd need a 10% deposit on a new house plus no debt - if you sell at £95K you will have £10K negative equity plus estate agents, removals and legal fees. IMO it's madness to buy without three months mortgage payments put aside in case the worst happens. You probably won't get a favourable mortgage until you have both been in your new jobs a few months. Can't your OH just move into the staff accommodation whilst you save up?

We don't have any savings. We don't owe £105,000 now, it's about £96,000. I've already been working for my new job since October (paid full salary but attending Uni for a year before moving there to start the training), so have proof of earnings for both of us. Obviously he'd have to find a new job if he moves too. And staff accommodation is just for single people which is rubbish!

I agree about buying a new house down there- besides all the obvious barriers (lack of savings for moving), my contract is for 3 years and then we may have to move again! Which is why we orignially wanted to rent the place out.

Yikes, this is proving to be difficult.