To sell or not to sell...

jake12

Hi,

I'm looking for some friendly advice please. We are looking to move up the chain this year into a bigger home for our growing family (2 kids, a cat and 2 gold fish). We are in a fortunate position currently as we our current interest rate dropped to 1.6% variable about 2 yrs ago after our fixed term deal ended.

Our current 3 bed home is worth between £110-125k and that is a realistic valuation airing on the side of pessimistic. We owe £75k on the mortgage paying £326 a month.

The new home we want is a new build but we do not want to part exchange or use any other buying scheme. We want to negotiate maximum discount from the sale price which is £235k. We expect to be able to knock this price down to £200-215k after speaking to the sales agent who was fairly forthcoming when talking about discounts, etc.

On sale of our house we do have some debts of around 15k to clear which although not ideal does still leave a big enough deposit for the purchase.

I am in two minds as to whether to try and rent our current house out which would generate between £500-550 pcm easily covering the current mortgage for the next few years at least. But then we need to raise the deposit another way? I just wanted some advice on how best to play the situation, it seems like a perfect time to let our house and could make a good pension pot someday.

Friendly advice welcomed please :-)

Thanks in advance

Werdnal

Lots of costs and regulations surrounding letting. It is not all about the income from the rent, there is much more to learn.

Are you even able to rent it out on your current mortgage? Lender will need to give consent and can up the payment, add set-up and admin fees and restrict how long you can let it for, how much rent you can charge etc. They can of course refuse!

Then you need to delcare rental income for tax - only mortgage interest payments are deductable so even if the rent in theory covers the mortgage, tax man will still want his cut.

If you think you are up to the emotional and financial commitment of becoming a landlord, have a thorough read through this:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

to understand what you are getting into. Its not all about how much rent you will get - its more about how much hassle and stress you could have to put up with!

jake12

Thanks for the link, very informative and very detailed too!

Certainly a lot of things to consider but I don't think there is anything in there which puts me off letting just yet.

I think keeping an eye on the long term benefits would outweigh the potential hassle.

Werdnal

Have you asked lender if you can let it?

You need to sit down and write up a business plan of your expected income and outgoings. How would you manage 2 mortgages if something happened to reduce the rental income (bad tenant, void in let, major repair meaning you have to re-house tenants temporarily), or your own circumstances changed (job loss, relationship breakdown, long-term illness). Whilst you may think these things will never happen to you, life sometimes throws a curved ball, and supporting one mortgaged property can be difficult enough, never mind 2.

Maintenance on a let property can also be a lot higher than your own residential home. Tenants expect everything to be perfect and you are at fault if it isn't. Whilst there are some things you would not be responsible for, and some things you can charge them to put right, if you have a regular turnover of tenant you need to factor in repairs, re-decoration etc between lets - maybe every 12 months or so, which you may not consider necessary if you were still living there. Obviously, these costs reduce your rental profit which will in turn reduce your tax liability, but it is still less money in your pocket!

Are you planning to use an agent or manage it yourself?