Remortgage with view to sell

Legacy_user

Looking for some advice on our current mortgage/house ownership situation...

We have a house with a mortgage that has just switched to SVR (repayment mortgage). We currently owe £216,000 and the house is worth approx £225,000-£230,000.

We relocated a few years ago and were given consent to let as we couldn't sell in the market at the time, so we rent the property out.

We really want to sell the house but are worried that putting the house on the market will result in our tenant moving out. We cannot afford our mortgage payments without the tenant. Our monthly replayments are £1100, with rental income of £640, but then we have our rent to pay where we live of £1200 aswell, so money is tight.

We were wondering if it would be possible to remortgage onto a cheaper deal (maybe interest only?) which could potentially mean we could afford repayments if the tenant left?

Any advice would be gratefully received!

bigadaj

You could remortgage onto a buy to let on interest only, but they normally require a. Minimum 25% deposit and the rent to exceed the mortgage payments by a comfortable amount.

Your situation don't look good and will only be resolved by selling, you're currently losing money every month which is never good in business. If I were you I'd put it on the market ASAP, and be open to any offers that would clear the debt as your equity is minimal.

Both you and the tenant have to give notice in any case, but I'd raise it with them so that they're aware and can look round for a new place with some time and notice.

mrginge

Shroom wrote: »

Looking for some advice on our current mortgage/house ownership situation...

We have a house with a mortgage that has just switched to SVR (repayment mortgage). We currently owe £216,000 and the house is worth approx £225,000-£230,000.

We relocated a few years ago and were given consent to let as we couldn't sell in the market at the time, so we rent the property out.

We really want to sell the house but are worried that putting the house on the market will result in our tenant moving out. We cannot afford our mortgage payments without the tenant. Our monthly replayments are £1100, with rental income of £640, but then we have our rent to pay where we live of £1200 aswell, so money is tight.

We were wondering if it would be possible to remortgage onto a cheaper deal (maybe interest only?) which could potentially mean we could afford repayments if the tenant left?

Any advice would be gratefully received!

Am i reading this right? £500 a month loss?

Why 'couldnt' you sell it when you relocated?
And what made you think that renting it out was a better option?

System

It was 2009, the market was bad, we hardly had any viewings in 6 months so it seemed like the best thing to do. We were also tied into a fixed mortgage with heavy repayment charges.

Thanks for your advice bigadaj, we'll start contacting some agents. Our tenant is on a rolling month by month tenancy, so the notice period is minimal (adding to our worries!).

mrginge

Is your tenant likely to play ball with this? If not you will have to evict them.
And who are you planning to sell to with tenants in situ?

bigadaj

mrginge wrote: »

Is your tenant likely to play ball with this? If not you will have to evict them.
And who are you planning to sell to with tenants in situ?

Rolling contract just means a months notice on either side. The vendor has some leverage in terms of a reference for the tenant, if they are awkward then no decent reference which can be important in securing a new property to rent.

As noted above tenants should be able to be removed withinsay six weeks so shouldnt be a significant bar to a sale.

System

She's generally a reliable tenant but i'm not sure. I can't imagine any tenant wanting to stick around in a house that's on the market.

It is a good house for rentals (the previous owner to us rented out the property too), but it's also a nice family home.

We considered auctioning the house to speed things along, whilst targeting landlords as well as people wanting a family home, but after speaking to the auction houses it doesn't look like a viable route given the amount we still owe on the mortgage.

So is your advice to just carry on as we are mrginge?

I don't think the tenant will refuse to leave, we're more concerned about her leaving us without rent coming in.

bigadaj

It might be a good house but the economics don't work at all based on your numbers, barely a 3% yield is not realistic, and no one would buy this for rent at your estimated price, you'd want at least 5-6% and many would want more for the risk and hassle.

This begs the question of whether your value is accurate, have you checked against similar sold prices recently? It needs to be priced to sell, which means not only below your valuation but potentially below the mortgage amount, you're haemorrhaging cash at the moment as you are no doubt aware.

mrginge

bigadaj wrote: »

Rolling contract just means a months notice on either side. The vendor has some leverage in terms of a reference for the tenant, if they are awkward then no decent reference which can be important in securing a new property to rent.

As noted above tenants should be able to be removed withinsay six weeks so shouldnt be a significant bar to a sale.

No. Rolling spt would mean two rental periods from LL not one month.
Tenant may refuse any viewings as a right to quiet enjoyment. OP is unlikely to have funds required to challenge this right in court.
Any reference must be based on fact, so any threats of negative reference without foundation would be unwise from OP.
Tenant can simply wait for court eviction (3 months?) and quite rightly hold up or prevent any potential sale.

Residential purchasers with a mortgage must have vacant possession, so OP must evict prior to exchange (if a purchaser who is prepared to wait can be found)

Advice on here to landlords is to always to remove tenants before trying to sell. This case is no different.

OP - did you take a deposit and has it been protected correctly?

System

We haven't had a valuation and my £225-230k is more like what we'd put it on the market for rather than what we'd get. On an optimistic good day, I think we'd get £210-215k?

Apologies, I put the wrong figure for what we still owe, it's £206,000. But I appreciate that's still hefty.

The tenant pays £750pcm (we use an agency to manage the property as we live too far to be able to manage it ourselves). A deposit was definitely taken & as far as i'm aware is in a protected scheme. I'll check that tomorrow though with our agent.

mrginge

Shroom wrote: »

We haven't had a valuation and my £225-230k is more like what we'd put it on the market for rather than what we'd get. On an optimistic good day, I think we'd get £210-215k?

Apologies, I put the wrong figure for what we still owe, it's £206,000. But I appreciate that's still hefty.

The tenant pays £750pcm (we use an agency to manage the property as we live too far to be able to manage it ourselves). A deposit was definitely taken & as far as i'm aware is in a protected scheme. I'll check that tomorrow though with our agent.

Given your ongoing losses it makes no sense to extend the amount of time it takes to sell by keeping the tenant in place. You could remove them, price it competitively and sell quickly, or leave hem in place and drag it out for months (increasing your losses), only to find you have to spend two months (min) evicting them anyway.

Also bear in mind that if you have not followed the deposit rules correctly then you cannot evict under s.21 without returning deposit.