Remortgage,sell,second mortgage - no idea!

MrsRsonthecase

I am really just looking for a point in the right direction. My husband bought a flat 5 years ago in a joint buy to let mortgage with his mum. He bought the flat for £108,000 with a £15,000 deposit. We have since got married and out grown the flat. We decided (probably slightly naively) to have the flat valued in order to sell it, however when making appointments with estate agents they have all said it'll be valued for between £85,00 - 95,000.

We are now unsure about what to do next. The mortgage on the flat is £174 per month. It is tracking and interest only. The mortgage is in my husbands and his mum's name. We also have the service charge of £365 per quarter. It is lettable for £530pcm.

My husband earns £31,000 pa and I earn £26,000 pa. I have no mortgage in my name. We have approximately £7,000 currently saved.

As far as I can see there are 3 options:

Option1:
Sell the flat and pay the negative equity - however this would leave us in rented trying to save and seems a foolish choice

Option 2:
Let out the flat and buy a 2nd house to live in, mortgaged in both our names. However I don't know if we would we be able to get a 2nd mortgage in both our names and leave the flat as let out? I know we would need a larger deposit than we currently have.

Option 3:
Let out the flat and rent a house. Would we then be best to change the mortgage or save the extra money into an ISA or similar?

Thank you for your help - really any advise would be appreciated. I know our next step would be an independent morgage advisor but I'd like to have an idea of what our options are.

MrsR

Dave_Ham

Move over Mr R, Mrs R is now sorting this out to make things happen..

Ok, firstly who is the lender on the flat?

Is it definitely a buy to let mortgage and you have been living there?

If it is a buy to let, then great you can find a new home and both of your incomes can be fully used. You will require a minimum of 10% deposit, although you can probably buy in the region of £200k based upon your income. This is subject to credit commitments being removed (not the mortgage though)

Hope this helps, feel free to elaborate and ask any additional questions...

MrsRsonthecase

The mortgage lender was Bradford and Bingley but is now Nationalised. We are tracking so have gloriously low repayments at the moment but up to 7% would still be easily covered by rent. Someone has said that we should have savings in the bank to cover 6 months of expenses on the flat in case we are unable to find a tenant.

It's definitely a buy to let as originally my husband bought it whilst living in London and let it out, we've never changed it.

What do credit commitments cover? We have no overdraft or credit card, a £3000 loan from Sainsburys which will be paid off in the New Year and other than that no financial commitments except student loans - will these stand against us?

I had no idea that the whole of our income would be able to be used - that's definitely good news!

Thank you for all your help

MrsR

Dave_Ham

Most welcome - always nice to be the bringer of good news.

This is definitely the case and 6 months rent saved, is a bit steep. It is sensible advice, although you would need the tenants from hell in order to need that much.

Would strip it down to 3 months and plunder whatever you can into savings towards a deposit.

As I said, 10% is the realistic minimum needed although at 5% increments starting at 85% the rates get more and more attractive...

MrsRsonthecase

Great, we'll get saving to plump up our deposit!

Thanks again