Mortgages vs Renting?!!

hevvy84

We are stuck for another 3 years in a fixed rate mortgage at 7.4% interest, we are now in a situation after having a baby where we are struggling to pay all the monthly bills, our mortgage company believes we should be able to pay the monthly payment of £825 a month but have agreed to put us on an interest only mortgage for a year to 'help' us out, this is now at £711 a month. The big question is are we best to sell up and rent a similar house for approx £550 or stick it out where we are and struggle to pay the bills and live etc? Or is there some other option we havent considered? We can not get out of the mortgage as there is roughly a £6000 early repayment on it.

Any advice would be great!!

Littlebutterfly_2

Best to try and reduce your other bills: if you have credit cards, etc. Get reduced payments and see the CAB for advice.

Given the choice, I'd rather have a my own roof over my head than be in the hellish rental market like I am now. In rental, nothing is truly yours and you can't as much hang a picture on a wall and that's aside from all the hassle from the property managers.

Stay put and bite the bullet.

wildfrog

I can certainly sympathise with your situation.
You say selling is not an option due to ERCs so I think there is probably 2 options.

1) Stick it out where you are.
Draw up a budget, put your SOA on the debt free wannabee board to get some advice where you can cut back, the oldstyle board is great too. Check you are claiming any benefits you are entitled too, tax credits etc. Cut back where you can and check you have the cheapest deal possible for utilities etc.

2) Rent the house out and rent somewhere else
You will need to check with your mortgage company that you have permission to do this and they may charge a fee.
You will also need to pay tax on the rental income. As you said you can rent similar for £550ish I assume the rental value will not cover the mortgage so you would need to top it up.
I suspect you would be worse off this way than just sticking it out.

The only other option I can think of is getting a lodger which you can do tax free. or getting a 2nd job
We are in the situation of having a house far too small for our needs, but unable to raise the 15% deposit need to upgrade (we have scraped together enough for 10% deposit, just need to save for fees etc) We are tied to our fixed until September next year. If next year we are not accepted for a 90% mortgage we think we will probably sell up and rent. At least we can then have a house suited to our needs while we continue to save.

Best wishes with your situation, I hope it all comes together.