Is coming off the ladder a good idea?

boo81

Hi

I need a bit of advice, really so im armed with as much info as possible - only considering options right now.

My husband is moving away for work, and I would like to go with him if possible but we are not sure financially what to do.

Currently I own the house and it is on the market and we would be expected to make £21K, plus I have £9K paid of my mortgage. This would be more than enough to cover fees and a deposit for a new house but we are considering moving and renting and coming off the housing ladder completely. Do we put this in a high interest bank account for a few years and at that time go and buy a house again or do we stick with the money tied up in the house and rent it?

Rent would cover just about over the mortgage, so we would effectively break even but that is considering it is occupied the whole time. We have debts and cant really afford non payment of rent of the house being vacant should that happen, so it seems like a big risk.

My parents have basically said they think selling and coming off the ladder is suicide because we then wont get back on again but my interpretation of the market is not that people cant get mortgages necessarily (even though it is harder) but that first time buyers are not able to afford deposits. My mum thinks that because you already have a mortgage it is then easier to get approved for another one......

Any advice welcomly recieved!!
Thanks

getmore4less

Buying and selling houses costs a fortune.

I think one question to ask is will you ever return to the area where this house is. If not then it becomes a long distant liability.


Having a mortgage does not help that much with affordability it is down the list.

Deposit, income multiple and debt levels much more important.

Debt is the concern and needs addressing you need to have a plan for that. One way to look at the debt is you have not really been able to afford this mortgage

If you don't want to become an acidental landlord then selling, pay of debt, rent in the new area as cheap as possible and re-save a deposit.


When deposit is re-saved, the job situation looks secure think about buying again.

I think house prices are going nowhere, there is a possiblity they actualy go down as there are more forced sellers like yourselves.


Check you lenders policy on consent to let, if they say no or up the rate that means sell. if you did rent what would be the gross yield(rent/house value).

DannyboyMidlands

I don't think that coming off the ladder is a big deal whereas keeping hold of the place and renting it out while you're away and can't afford rent defaults, maintenance etc sounds like a massive liability.

Sell it, clear your debts, bank the rest and save like mad. Then you'll be in a good position to buy again when you want to. Hopefully for you house prices will also continue to fall in the meantime.

pinkteapot

Your parents are thinking of the market that existed in 2005, or of the market over the last 30 years. It is only true that if you sell you won't be able to buy again if house prices are rocketing up, which they simply aren't at the moment.

My parents sold in 1989 as we were relocating and rented for 9 months, as they couldn't find a house they liked straight away. Before starting to rent they had offered on a new-build off-plan and been turned down by the builder. While they were renting, the market crashed horribly and they went back and offered 20% less than they had before and the builder almost bit their hand off! They inadvertently timed the market perfectly.

As I said, your parents' view is based on the assumption that house prices rise madly while you're renting. In this economy, there's no reason to expect that to happen in the next year or two. Assuming you're not talking about renting for the next ten years then personally I think you'll be fine.

It's exactly what I'd do if relocating. Renting first to check out good areas etc when you don't know a place is a darn sight cheaper than buying a house you later realise is all wrong.

Also, in this climate where lots of chains fall apart, you'll be in a much better position to negotiate a discount on your next house as you'll be chain-free. On top of that, your place will sell as 'no onward chain' which is appealing to buyers. Selling and going into rented and then buying from rented is soooo much less stressful than trying to tie up a simultaneous sale and purchase!

Only real downside is an extra set of removal costs and the hassle of moving twice.

Re renting your place out, you will need consent to let from your mortgage lender. If given, this is usually for six months to a year. If you are keeping the house for longer then you will need to change to a BTL mortgage. For this you will need around 30% equity in the property and for the mortgage repayment to only be around 70% of the monthly rental income.

If you are moving away you will probably want to use a managing agent for the property (how would you make repairs if the tenants have problems?). If so, they take a fee of around 10% of the rent paid.