We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Mortgage/Rental Advice Sought!
Mel_Wood
Posts: 8 Forumite
Hello there all, I'm quite new on here and hoping for a little guidance, and I hope I've put this question in the right section.
I'm trying to get my head around whether to sell or rent out my current house and which is better overall in my situation. I've looked at some sums and think I know the way to go, but also suspect I'm missing something important from the equation, if anyone can see it...!
Right.
Current house bought in 1999, interest only mortgage with Sainsbury's Bank for £45,000 over 25 years. Interest payments are pretty negligible, £65 per month and I have two endowments in place to pay off the principal which are currently on target, or alternatively as long as the house value remains significantly above that £45,000 we'd have the means to repay that when we choose.
The house is now valued at about £110,000.
In savings we have around £90,000, but haven't paid off mortgage because the money is earning more in bank than the interest paid back to Sainsbury.
What's puzzling me is whether we would be better off ...
renting house 1 and buying house 2,
selling house 1 and buying house 2, or
paying off mortgage on house 1, renting out house 1 and buying house 2?
If we decided to rent the property, we could take in £480 per month from a reputable letting agent, but naturally we'd then have a smaller deposit on new house.
Looking at the mortgage deals on offer, my impression is that the rent earned would more than cover the Sainsbury's mortgage and the increase in the house 2 repayments due to having a smaller deposit, but is there more to it than that, more to consider?
If we paid off house 1, rented it out and bought house 2 we'd own it as an asset outright but would leave us the smallest deposit and therefore give us the highest repayments. That seems like not the best way to make the money work for us.
Ideal house 2 is likely to be approx £250,000.
I really apologise if this is in the wrong part of the forum, but would appreciate very much any advice any of you could give me please. My leaning is towards renting out house 1 without paying it off (lender is ok with that) but I feel there's stuff I'm not considering, and as it is by far the biggest financial decision I'll ever make, I'm after a bit of guidance so that I get it 'right'!
I'm trying to get my head around whether to sell or rent out my current house and which is better overall in my situation. I've looked at some sums and think I know the way to go, but also suspect I'm missing something important from the equation, if anyone can see it...!
Right.
Current house bought in 1999, interest only mortgage with Sainsbury's Bank for £45,000 over 25 years. Interest payments are pretty negligible, £65 per month and I have two endowments in place to pay off the principal which are currently on target, or alternatively as long as the house value remains significantly above that £45,000 we'd have the means to repay that when we choose.
The house is now valued at about £110,000.
In savings we have around £90,000, but haven't paid off mortgage because the money is earning more in bank than the interest paid back to Sainsbury.
What's puzzling me is whether we would be better off ...
renting house 1 and buying house 2,
selling house 1 and buying house 2, or
paying off mortgage on house 1, renting out house 1 and buying house 2?
If we decided to rent the property, we could take in £480 per month from a reputable letting agent, but naturally we'd then have a smaller deposit on new house.
Looking at the mortgage deals on offer, my impression is that the rent earned would more than cover the Sainsbury's mortgage and the increase in the house 2 repayments due to having a smaller deposit, but is there more to it than that, more to consider?
If we paid off house 1, rented it out and bought house 2 we'd own it as an asset outright but would leave us the smallest deposit and therefore give us the highest repayments. That seems like not the best way to make the money work for us.
Ideal house 2 is likely to be approx £250,000.
I really apologise if this is in the wrong part of the forum, but would appreciate very much any advice any of you could give me please. My leaning is towards renting out house 1 without paying it off (lender is ok with that) but I feel there's stuff I'm not considering, and as it is by far the biggest financial decision I'll ever make, I'm after a bit of guidance so that I get it 'right'!
0
Comments
-
Putting finances aside for the moment.
Do you want to be a Landlord and run a business?
While it can be extremely profitable, equally you be unfortunate enough to get the tenant from hell.
Some good advice can be found on the Buying and Renting board. There's a really good guide you'll get directed to if you post there.
Remember from the rent you'll have costs to pay. From the net income, tax will be deducted. So the return may be as great as you imagine.0 -
Ah, thank you Thrugelmir. I hadn't spotted the Buying and Renting board. I will find it now and have a look. Cheers.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 351.7K Banking & Borrowing
- 253.4K Reduce Debt & Boost Income
- 454K Spending & Discounts
- 244.7K Work, Benefits & Business
- 600.1K Mortgages, Homes & Bills
- 177.3K Life & Family
- 258.3K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards