Selling house and renting for a year

ladystow

Hi

A description of our situation (it's a bit complicated!) I work full time PAYE and my husband is self employed (has been since Jan 2013) but is contracted to work for one company for 18 months (likely to be extended to 3 years). Joint income of £83k gross

We want to move house as we are in a 2 bed with 2 children and very little space.

Our mortgage company (C&G) won't let us port our mortgage of £216k as he is recently self employed and our credit rating isn't good enough. A financial advisor has advised us to wait until he has 12 months of accounts before we try again.

We have lots of debt in credit cards and a couple of loans. Our house is valued at around £400k - £450k so if we sold we would have around £200k equity.

We are currently on interest only mortgage (have been for 2 years), this comes to an end in August and they won't let us carry it on for the 3rd year as they originally said could happen. With all our outgoings (including nursery fees for our daughter) we are going to struggle to pay the mortgage. If we could move house we could release the equity, pay off all the debts and have a bigger house but we can't do that because of the issues above.

We are thinking about selling the house, using the equity to pay off the debts, putting the remaining money (around £130k) into a savings account and renting until next year then applying for a mortgage again.

Is this a crazy idea? We are looking to move to a cheaper area so would be wanting to borrow around £250k maximum and then obviously would have a good size deposit and no outstanding credit.

Any thoughts on this would be appreciated

kingstreet

Where did you find this "financial advisor?"

There are lenders who will take a contractor with a daily rate, subject to industry/CV and length of remaining contract.

I suggest you find a proper independent or whole market mortgage broker as your current lender will simply assume if they don't do it, no-one will and that is often not the case.

If you have not already done so, obtain all three versions of your credit file so the broker can "roadmap" a future plan for you taking into account the employment and credit issues.

ladystow

She was recommended to us by a friend. Thanks for this advice, I will look into this further

kingstreet

I tend to find people who are described, or describe themselves as "financial advisors" are in reality insurance salespeople who use things like mortgages as a sideline to enable them to sell a single range of insurance and protection products.

This is the route pioneered by the likes of Allied Dunbar in the 1980s and 1990s.

As a consequence, their experience of mortgages may not be as detailed and extensive as a mortgage broker who does nothing else.

Please talk to other brokers in your area. Try https://www.unbiased.co.uk, switching off the "sponsored ads only" option, so you get a full list for your area. Talk to them, get a feel for how they work and make sure you get a copy of their initial disclosure document at the outset so you can see what they do, how they do it and how they get paid.

Thrugelmir

Clearing your debts and getting control of your life again seems a sensible idea. At the moment you are going nowhere. In fact one unforeseen disaster could tip you over the edge entirely financially.
Being on an interest only mortgage means you are doing little more than renting at the current time.

Focus on resolving your immediate issues now. Worry about the future when the times right.