should we sell or keep

decsdad

If you have actually got an offer that leaves you £3k short, take it.
You mentioned the tenancy is ending soon, do you have someone else lined up, 2 months empty and you will be paying £1480 in mortgage payments.
Regarding the house prices going up a bit to remove negative equity, would just mean you pay more too when buying later where you are now.

If you dont actually have an offer, when your tenant leaves, put it up for sale/rent and take whichever comes along.

sternjohn662200

Well here is some figures i have worked out as below after getting more information from the wife. We have had a recent offer of £133k and the mortgage is £134.5k remaining. Fees for selling are £3k. We will sell house now or wait 2 years. We have also been informed we can have tenant in straight away so there would be no loss on rent and we have consent to let for 5 years at small fee and all as rented previously have all relevant insurance etc.

Keeping House

We have just moved to svr at 4.78% so subsidise mortgage at £120 per month which covers fees for maintaining property, ie gas safety, boiler cover and we can overpay mortgage at £740 per month

Amount extra paid off mortgage in 2 years based on numbers above. £22,376 (Based on mortgage calculator) Assuming house price is same in 2 years - after selling inc fees we would have approx £18k

If the svr went up to 5.99% which is what we were on when fixed we could only overpay mortgage by £640 a month. we would in 2 years have paid an extra £19770 (again based on calculator) so then less fees for selling we would have approx £16k

Selling House

Fees for selling property £3k, loss on sale of house £1.5k so we would be £4.5k in red. Saving £860 per month (made up of what we subsidise and what we overpay) over 24 months we would have approx £20k which would bring us approx £16k into black.

Are we not better keeping as at the moment we are better off with the svr.

Apologies for this, any help is greatly appreciated.

pinkteapot

From your numbers, you would be £2000 better off in two years time by keeping the house, if:

1) House prices are the same in two years, and
2) There are no unforeseen big bills in the interim (e.g. needing to replace the boiler)

Personally, I wouldn't keep it for the sake of being £2k better off. After two years of being lived in by tenants the house will be tattier than it is now. So even if house prices are at the same level then you may not get quite as high an offer then. It's also pretty easy to have £2k worth of repairs crop up for a house in that space of time.

The thing is, it all comes down to what you think house prices will do and no-one on here can answer that for you. If prices go up and you sell now, you'll be kicking yourself. If prices go down and you still have it, you'll be kicking yourself.

In my view the impact of what's happening in Europe at the moment hasn't filtered into our economy yet, and the current economic climate will persist for a few years, if not worsen. I see no prospect for house prices increasing in two years but a risk that they will fall. If you were saying you'd keep it for five years then I'd say it might be worth thinking about. But not for two years.

But, this is just my view based on what I think of the economy and house prices. What you do will ultimately come down to your view.

pinkteapot

One other point - £860 into savings for 24 months is £20,640 (not just "about £20k") and that doesn't include interest. If you could find savings accounts paying 1.5% then you would actually have £20,939 (source: http://www.thisismoney.co.uk/money/saving/article-1633419/Monthly-lump-sum-savings-calculator.html)

If you could get 2.5% on your savings then you would have £21,142.

As I said, it's a case of damned if you do, damned if you don't, as the unquantifiable here is what the house will be worth in two years' time.

Thrugelmir

sternjohn662200 wrote: »

Are we not better keeping as at the moment we are better off with the svr.

Apologies for this, any help is greatly appreciated.

You are assuming that the property remains let with no void periods or tenant defaults on rent for the whole period.

You should factor a contingency (£) into your plans.

JQ.

pinkteapot wrote: »

One other point - £860 into savings for 24 months is £20,640 (not just "about £20k") and that doesn't include interest. If you could find savings accounts paying 1.5% then you would actually have £20,939 (source: http://www.thisismoney.co.uk/money/saving/article-1633419/Monthly-lump-sum-savings-calculator.html)

If you could get 2.5% on your savings then you would have £21,142.

As I said, it's a case of damned if you do, damned if you don't, as the unquantifiable here is what the house will be worth in two years' time.

. . . and money in a savings accout is safe. What happens if propery prices drop by 5%, what if they drop by 10%, what if they dropped by 15%?

I think you're mad to keep the property. It makes a loss every month and will continue to do so. That loss could be multiplied several times over should house prices start to slide.

Sell up while you can and save like mad. House prices are unlikely to rise anytime soon, so to hold it will just compound your loss.

decsdad

Right, here's what I think, what happens with house prices is kind of irrelevant, because the op is planning on buying another house if they sell the current rented out property. So he will be affected by a rise or fall whether he sells or keeps it.
So really, it is a great offer you have to get out of a position which is currently costing you money. You need to consider the fact that you have an offer now, in two years when you want to sell there may be no offers, while you are paying out for the mortgage possibly with no tenant. There are a lot of houses that have been on the Market for a long time, a very long time.
Take the offer, buy yourself a new house, and move on with your life.
Only my opinion.

JQ.

decsdad wrote: »

Right, here's what I think, what happens with house prices is kind of irrelevant, because the op is planning on buying another house if they sell the current rented out property. So he will be affected by a rise or fall whether he sells or keeps it.

Whilst the rest of your post makes sense, this does not. It's completely relevant, on the basis that the OP is already in Negative Equity and plans to overpay the mortgage to enable him to buy a house to live in at a future date. If values fall all those overpayments will be eaten up by falling values - they will lose all their savings! And therefore will not be able to buy another house as they won't have a deposit.

However, if they'd sold their house and made those overpayments into an ISA or such other safe investment vehicle, their savings would still be safe.

sternjohn662200

Suppose the other point to add here is we dont have the money to cover loss and would need to borrow and we pay for boiler cover which is included in what we lose.

Were gonna weigh all the options up and see what happens with offer and take it from there, in a ideal world we would sell and start again but gotta take it day by day really. She had this when i met her so just trying to help really, she regrets the 100% mortgage but suppose most do.

Anyway thanks for the help the more info we have the better decision we can make.

decsdad

JQ. wrote: »

Whilst the rest of your post makes sense, this does not. It's completely relevant, on the basis that the OP is already in Negative Equity and plans to overpay the mortgage to enable him to buy a house to live in at a future date. If values fall all those overpayments will be eaten up by falling values - they will lose all their savings! And therefore will not be able to buy another house as they won't have a deposit.

However, if they'd sold their house and made those overpayments into an ISA or such other safe investment vehicle, their savings would still be safe.

You are of course correct in what you say, but I was kind of meaning something else....

If they keep the house and the market goes up, they will get some profit, and need it for their purchase of a new property. If they keep the house, market falls, they will lose more, and not need it anyway for their next purchase because that will have fallen too.
This doesn't take into account the resulting lack of deposit and inabilty then to buy.

So as we both agree, if they sell, they are securing their future savings hence deposit. If they keep it, they are gambling the savings on the market not falling.