rent out my place and buy another

barry_g

i own my 2 bed in orpington its been on the market for somtime now because i need to down size and pay off dets but ive not even had one call for a viewing.
a friend said to me why dont i rent my place and use it as a deposit to buy another with a morgage.the rent in my aera are about £875-£950 pm,and im looking at buying around the £160,000-£180,000,my place is on the market for £230,000-£240,00.
went to bank to see what they could advise me to do they said downsize or get a small morgage min £25,000,but then i will still owe them that and then bills will start to build up again and i1l be back to square one again in 3 years time.....anyone with some advise please.....

Werdnal

The theory of renting is fine, but there are no guarantees.

How can you ensure the tenants will be reliable payers? - if you are depending on a regular income from letting to secure your future home, it is a big risk.

Also, the income from rent is not all profit - you will need insurance, gas safety certs, a contingency for repairs/maintenance, and a fall back fund to cover missing rent.

You may also have frequent changes of tenants, giving you possible "voids" with no rent at all, and re-letting fees. Would you use an agent? - another cost here.

Also, rent is taxable so HMRC want their pound of flesh too. How much would that leave you to cover your ongoing costs in your new home?

Have you already got a mortgage on the property you intend to rent out? If so, and this is on residential terms, then you may not get permission to let it anyway.

Would it not be preferable to reduce the price to sell and make a fresh start?

Flyboy152

You will need to check with your mortgage lenders first. You will need to find out what you maximum loan to value is, for a start. Then find out how much more you can borrow to buy the house to purchase. The total borrowed (both mortgages) will need to fit in with their lending criteria. Generally lenders are looking for 130% rental income to mortgage repayments. So, at your top estimate of £950 per month rent, the maximum the mortgage, on the rental property can cost you is £730 per month.

lincroft1710

Reduce the asking price to £220K and see if that attracts any viewers.

barry_g

no i own it out right no morgage

Flyboy152

Any mortgage you put on the property now, will not be tax deductible.

MickMack

It sounds like your plan would complicate your finances further, add uncertainty and possibly leave you much worse off...............but that's just my opinion!


At the moment you have £240K of equity, you are mortgage free, and you have accumulated what sound like unmanageable debts....

So the first question would be, how have you run up debts if you are mortgage free and why have they unmanageable..............dont get me wrong this is not me criticising, i'm just curious if you understand the underlying cause because that's really what's needed before you can work out how to resolve it.


Wouldn't it be possible to get an offset mortgage for an amount which would clear your current debts, if the min mortgage amount is more than you need then just stick it in savings offset against the morgage....

diable

If you own it mortgage free then for the time being why don't you rent the second room out to some 23 old hottie (male/female the preference is yours) ;o)))

barry_g

bacially i dont earn enough from my job to live and travel to from work.tried tax credits and all that but nowt i dont get anything and the csa jumping all over me for more,other than getting a new job ive tried,going to have meters fitted to pay dets on elec/gas and water,water alone for me is £500 on a meter it will be a 1/4 of that.and i dont earn enough to rent and live on my own and i need a 2 bed for my boys when i have them....

ViolaLass

Wouldn't selling the house, paying off all your debts and starting again make your life easiest?

barry_g

oh yes but nothing`s happening on the market here its dead and im right near a mainline st to london aswell....