Selling to Rent

EdInvestor

seven-day-weekend wrote:

One idea I've come up with (and it may be a !!!!!! idea for all I know), is to sell our UK house and rent one with our son, so that all three of us are tenants. I can see several advantages to this - we can liberate £175,000 from the sale of our house, we won't have to bother to keep money for it's maintenance, we can live in a nicer place, we can use the interest for our travelling, and while we are travelling our son will be there to look after the place.

The disadvantage to renting for anyone who's been a homeowner in the past is the potential instability: you can be given 2 months notice and out you go,if the landlord wants to sell, for instance.

Have you considered trading down to a cheaper home and liberating some money that way?

ReportInvestor

I agree.

There are extra costs involved in owning your own property but there are also extra costs involved in renting.

You have to move far more often.

And the agents are brutes when it comes to insisting on the carpets & curtains being professionally cleaned - after they've booted you out at a time that messes up your life / holiday plans, of course .

seven-day-weekend

EdInvestor wrote:

.

Have you considered trading down to a cheaper home and liberating some money that way?

We'd like to if we could. The absolute most we will get for our house is £175,000, and probably less. It's a city mid-terrace. I don't think we would be able to buy anything else big enough for that apart from something similar.

We've gone off the idea of renting anyway, for the reasons mentioned above (two months notice etc.) and after thinking about it further, we realised that our share of the rent would have to come mainly out of capital :eek: as we don't have much income and couldn't afford the rent out of income.

So, as I said at the beginning, it's probably a !!!!!! idea. Our friends who live in the converted stately home and made me think renting might be a way forward, earn over £35000 between them - our income is less than £10,000.

So I think it is not after all a very good idea!

Thanks to everyone for your help and support.

seven-day-weekend

pbradley936 wrote:

Have you thought of getting an offset interest only mortgage on your UK house for about half its value? The point about it being an offset mortgage is that if it is tied to your current account you will not pay interest if you do not spend anything. It has the advantage of freeing up some cash, still being yours and limiting any Inheritance Tax liability later on. Because of your age you might only be able to take it over 12 years.

How does this work? Would we have to pay the mortgage off after twelve years? Or is it similar to equity release where you don't pay it back?

And what do people think of equity release?

Actually, I think I'll start another thread on 'equity release' on the Silver Savers board.

Thanks all

Mrs_pbradley936

No first hand knowledge of equity release but someone told me it is not a good idea if you have children you want to leave anything to. Great for the childless apparently. The interest only offset mortgage I do know about because we have one. We used the money to help our youngest son buy a place but you can use the money for whatever you like. Ours is with Barclays/Woolwich and we had to move all our accounts over to them. If like us you had bits a pieces spread all over a bond, an isa few premium bonds and so on you have to move it all under the one umbrella. We have four accounts all linked together mortgage, current, reserve and mortgage top up (which we have never used). You do not earn any interest but you do not pay any interest either so you need to take advice on your own circumstances but say you wanted to borrow £100k. After doing all the paper work they would put the money into your account and if you spent £5k they would charge you interest on that. If in the meanwhile you had money coming in say £500 that would knock the amount you were borrowing down to £4.5k. I think you can get it tailored to whether you want the interest applied daily, weekly or monthly and again your own circumstances will tell you what you should be doing. Hope this helps.

Mrs_pbradley936

How it works day to day is that the mortgage account will always stay at £100k unless and until that is repaid. The current account is self explanatory, it is the reserve account that is the key to how it all works. At the end of every month anything over £100 is swept out of your current account and into your reserve account. If I find a link that explains all I will put it on here.

Mrs_pbradley936

Her is link which explains it better than I can:-

http://en.wikipedia.org/wiki/Offset_mortgage

roswell

I dont believe the offset would be a good idea in this situation, firstly to get a morgage you need to prove income, secondly the op wants to use the interest to generate income you cant offset 100K and generate interest off 100 K so for every £1 thats is spent or outside the offset the op would pay interest meaning that there already paid for house would have a outstanding morgage when they retire which isnt what the op is looking for.

roswell

Pbradley you dont need to sweep your money into the reserve account tyou can hold it on your savings accounts it serves the same purpose that money in any of the 3 accounts is not getting interest but at the same time your not paying interest on the morgage to the same value, you can leave the money in your current account if you wish it will have the same effect, the only benifit to sweeping into your reserve account is it reduces the actual debt not just the interest. (if your looking to save some money you coudl change the sweep to the savings account)

seven-day-weekend

Thanks all for your replies.

I've read some links on equity release and it is not for us (it's pretty scary) ; I would be obsessing daily about the interest rollup. Also we would like to be able to leave the house (or at least most of the equity) to our son.

The offse t mortgage I would not be happy with for the reasons detailed above.

What I think we will do is sell our Spanish house. We can then use some of the money to renovate the little derelict wreck that we own next door and bought for a song at the same time we bought our main Spanish house. This will give us a small holiday home so that we can still have a base in this lovely village and beautiful mountains. We will still have a paid-for house in the UK, and also some money left to finance our travelling.

We are giving ourselves until next spring to finish renovating our main Spanish house and make the decision. If this is what we decide to do, it will then be a good time to put it on the market.

We've realised now after reading all your advice that remortgaging and equity release are not for us as we do not want any further debt after having been debt-free and only having a small income. Neither is renting viable as our income is too small.

Thanks all for your replies.