Sell or rent current house when purchasing a new home

Firestarter78

Hi, I'm looking to move home and debating whether to sell or rent out current home bearing in mind the current market and long term investment.
My current home has 30k left to pay on it's mortgage. Do I sell this and start again with a new home or keep this house, rent it and purchase a new home?
Estate agents have valued my house at 115k.
Just looking for any advice from anyone who has/is in a similar situation-do I rent it out or sell? What would be the advantages and drawbacks?
Many thanks

holly_hobby

Before we get too far down the lane with this, if you retain your current home to rent out, how will you fund your deposit for your next property ?

H

Firestarter78

I have some savings, but mostly would be looking to take equity out of current home.
F

theoretica

Do you want to be 'in property'? If you did not own a house but had £85k in the bank would you think to buy one house or two?

holly_hobby

Firestarter78 wrote: »

I have some savings, but mostly would be looking to take equity out of current home.
F

Right ok.

Property no 1 - which you will let.

You can look to remortgage this onto a Buy To Let Mortgage - max LTV is circa 75% - 80% for a first time landlord, so the main questions are: -

1. Is there sufficient free equity to permit a remortgage to this LTV ?

2. If so - will the released capital together with your savings, be sufficient to fund your deposit on your new primary residence ?

The whys and wherefore's re rental income reqd, how to obtain your residential mge, etc, etc ... can be discussed if the answers to the above are positive - otherwise its academic in delving into the subject any further.

Little bit more info will assist in determining whether this is a go'er or not ...

Hope this helps

Holly

Firestarter78

Financially I can afford the 2 houses, just means I spend less on my primary home. What I know little of is whether it is better to sell, take the equity and move on or rent it out with the aim of it being financially beneficial, which is best in the current climate?
Also how would renting affect my income tax and when it comes to selling (eventually) how do tax calculations work.
Therefore i can afford the outlay but what's the best long term potential (10-15yrs), ploughing all money into one house (one requiring work) or having the 2 bearing in mind tax, maintenance costs, periods of no tenants etc.
Thanks

getmore4less

start with the gross yield on the rental.

You will be borrowing 100% of the value.

So it needs to pay that interest, then the other costs, and then the upkeep,, whats left after that?

Thrugelmir

Firestarter78 wrote: »

but mostly would be looking to take equity out of current home.
F

You may find lenders are generally unwilling to release equity for this purpose.

holly_hobby

Firestarter78 wrote: »

What I know little of is whether it is better to sell, take the equity and move on or rent it out with the aim of it being financially beneficial, which is best in the current climate?

Who has a crystal ball ???

Do YOU want landlord reponsibilities (inc all that goes with having tenants, whom can be angels or horrors !) ?

If not the answers pretty clear really.

You should also consider that property as an investment, is a pretty much ill-liquid asset, in that your capital is not readily or easily available ..... so if you have little to no other emergency capital to fall back on, and the market is flat, you may have to reduce your projected profit/equity gain, just to get out asap.

Firestarter78 wrote: »

Also how would renting affect my income tax and when it comes to selling (eventually) how do tax calculations work.

You would declare your annual net (of permitted deductions), via an annual self assessment (or you could employ an accountant to do the return).

Upon sale, if you sell within 3 yrs of vacating the property as your main residence there will be no Capital Gains Tax (CGT) - if you sell after that time, any taxable gain will be mitigated by the application of primary residence relief (PPR relief), lettings relief, and your annual cgt allowance - essentiall meaning that you're broadly looking at a gain in excess of 50k, before you would be exposed to any CGT liability (based on current HMRC reliefs/deductions). Again, this will be reported to HMRC via your annual SA.

Firestarter78 wrote: »

Therefore i can afford the outlay but what's the best long term potential (10-15yrs), ploughing all money into one house (one requiring work) or having the 2 bearing in mind tax, maintenance costs, periods of no tenants etc.
Thanks

Only you know your circumstances and can make that decision ... ..... but it sounds to me that you've already decided a landlords role may not be for you ....

Hope this helps

Holly