Move up the ladder or pay off mortgage?

hazyjo

btw, this came up yesterday which I thougth was a good deal:

http://www.rightmove.co.uk/property-for-sale/property-43536685.html

along with this:

http://www.rightmove.co.uk/property-for-sale/property-29687940.html

Jx

El_Torro

As mentioned it's really up to your personal preference which option to go for but I think I'd keep the flat you've got and rent it out when you move up North. You've already mentioned that you'd like to move sooner rather than later.

Also I imagine it's easier to rent out a 2 bedroom flat than a 3 bed house, meaning there will be shorter vacant periods.

I'd also be wary of putting too many eggs in the London property basket. The boom may not last forever.

smfdurham

Yeah I think you're right that keeping the flat might be better, I really don't think the long term value of 2 flats in leytonstone or 1 house in chingford would be drastically different (although of course no one knows for sure!) but the advantage of keeping the flat is that it's less disruption in the short term and if we get into any financial difficulty for whatever reason in the future we don't have all our eggs in one basket (house). I also agree that renting flats in Leytonstone should always be fairly easy, we're a 2 min walk to the central line.

I'll check details on the lease but I'm pretty sure I can rent out our flat (albeit we'd need a different mortgage). So I guess then for now the plan is:

Next Summer stay in our flat, aim to buy another flat at around £250k, paying £75k deposit and owning 30% of it with a BTL mortgage. Rent it out for 5 years and move up north converting our existing flat into a BLT mortgage. That will leave us £160k to pay on our existing flat and £170k to pay on the flat we aim to buy next summer. That would leave a mortgage of around £780 p/m and a mortgage of around £820 p/m (based on 4% interest rate), rental income would be around £2,000 combined for both of those flats meaning £400 profit per month before fees, tex, expenses therefore I'd expect us to broadly break even in the first few years. We'd also have saved enough by then to put down a 30% or so deposit on a £300k house in north by then - £1,000 per month which would need to be paid out of our salaries.

Is this sounding sensible, comfortable, or dangerous?

hazyjo

Without knowing income, it's impossible to say. Plus - would that income drastically change by moving north.

Jx

smfdurham

combined income is £120k or so now, in the north that would likely be £60-70k

I imagine next year I could get accepted to get a BTL mortgage? That that income, zero debt and a £170k outstanding mortgage?

Although in 5 years time with 2 mortgages worth £330k outstanding I might find it hard to get a third mortgage on a combined income of £70k? Would that be the case even if I had rental income covering the costs of those 2 mortgages?

hazyjo

Just to add, when someone said about having all your eggs in one basket, they meant 'property' in general, not 'one house'. So one house would be classed as less of a risk than say two or three properties. Or, if you do invest in two/several, at least put your money elsewhere too (investments, etc).

Jx

AdrianC

hazyjo wrote: »

Just to add, when someone said about having all your eggs in one basket, they meant 'property' in general, not 'one house'. So one house would be classed as less of a risk than say two or three properties

In what way?
If you've got one house renting for £1500pcm, vs three flats for £500pcm each, you're at risk of having an extended void - say, a bad tenant stops paying rent, refuses to leave until a court forces them to, then trashes the place - cost you £1500pcm in lost rent. If one flat has a void, you still have £1000pcm coming in to cover the mortgages.

hazyjo

I think they were implying that if say you had £600k to spend, it's not advisable to spend ALL of that on property. Always wise to have other investments with that money. Yes, I see the point your making and I gave a rubbish example - was just trying to say they should have other investments, not put it all in property.

Jx

dell12

The market in Leytonstone has been crazy for the last 6 or so months. Asking (and achieved) prices on the average 2 bed flat have gone from about £200k to £300k+ in the space of 6 months. The same's happened in Leyton.

According to the Land Registry prices in Waltham Forest rose 19% last year - the fastest increase in any London Borough aside from Hackney. Compared to places like Hackney both look very good value indeed there's a heck of alot of people buying who've been priced out of Hackney. It feels like it's places outside of Central London in zones 2/3/4 which are seeing the largest increases right now. They're the last affordable places left for Londoners to buy.

I get the feeling that in the last month things have cooled slightly but generally I think it's an area on the up I think with good fundamentals.

smfdurham

We actually had our flat valued today. We paid £190k 6 months ago and it was valued at £250-260k - it's just crazy