Is coming off the property ladder voluntarily a good idea?

emylou

Hi, just after a little advice on behalf of my older brother; he's 32 & has a mortgage on a 2 bed flat in an ex council block. He's not especially happy there but "can't afford" to move & would have to downsize, anyway- he is changing jobs & will have even less "spare" money each month, cos the flats are ex-council he often gets bills for maintenance and stuff too, a friend said to me the other day "even when you are paying mortgage the property isnt yours so changing to renting isnt a big thing" but I dont know my brother would agree (friends situation was different as he was about to have house repossessed, but that's another story!) I'm considering renting his smaller 2nd room but it's about 1/3 rd of my current bedroom but would be £100 cheaper but I wondered if people think it's worthwhile suggesting to my brother he sold up & rented or rent his place out & move in with a family member himself until his salary increases (he would like to go on holiday soon & have a life outside work & flat but has no spare money)
Any ideas appreciated thanks!!

roger56

Maintenance bills on flats are normal regardless of whether they are ex council or not. Flat owners share the cost of the building maintenance.

The "property isn't yours" statement is true if the flat is leasehold. I would expect that to be the case. Your brother would own the leasehold and the flat is mortgaged, I'd expect there to be at reasonable term left on the lease (70/80years plus).

Does the council own the freehold??
Is the flat a part buy part rent with the council??

Before selling, he should consider the costs of selling (solicitors / estate agents etc). The idea of renting a room sounds sensible, but make sure the leasehold allows this.

Read here for detail about leasehold:
http://www.communities.gov.uk/index.asp?id=1151590

Gorgeous_George

I think the friend was referring to the fact that as the property is mortgaged, it is owned by the building society.

The options are:
1. sell and pay less in rent than in mortgage payments. He would not have security of tenure but would be free to spend his money on other things such as holidays etc.

2. stay where he is and weather the storm. Work may improve and IRs will fall again. In the meantime, taking a lodger to help with the mortgage and the bills is possibly a good solution. His home will be shared and not everyone likes to share their homes.

Then there's the usual HPC argument. If prices fall he may wish he'd sold. If prices rise, he may wish he'd hung in there.

Decisions decisions!



GG

firesidemaid

he could rent either his own room or the spare room out to you or someone else - you can earn up to £4000-odd a year in this way without paying tax on it.

or, he could just rent the whole flat out and let it be paid for - will have to inform mortgage lender, change insurance etc.