Should we Sell and Move or Rent and Move

I_Beat_the_system

Hi all , I have a little situation here and looking for your thoughts on the matter - It's been wrecking my head for years. And now all ready with the clean credit file , and deposit, we want a new bigger home.

Some Back ground - Wife has a poor credit file and 5 yrs to go, Low income of approx £80PW - Cant take out any equity due to low income etc. Property bought 13 yrs ago in wife's name when she did have a great credit file.

Husband -Started with poor credit file but over the years improved - Never owned a property - Debit free - 5 Star credit File - income approx £30K - £40 PA -

Husband currently pays all on current property
• Mortgage
• Utility bills
• Food
• Water
• council tax
• the lot
Wife's income is mainly food money and kids clothes

Currently we have a Mortgage with Northern Rock £44K left - Property Value £102K
Monthly Payments £350 - Paying £450

The mortgage is in one wife's name only.

The house is too small now and we want to move. The house we would be looking at a mortgage of £170K with a £10K Deposit and more as this year goes by. ( I could get this to 16K end of 2014) All on my name.

Wife is saying Sell current home and generate a bigger deposit - I'm saying let me get the new mortgage on my name only and keep current home for rent.

Rental income would be approx £495 - £550 PM. With the NR mortgage being so low and the amount it would be crazy to sell. Thinking more for the future pension etc .

Husband would get the new £170K mortgage- Monthly Payments £800-950 PM . factored in Bank of England Rate increase

Can husband afford the payments of the new mortgage with my current salary ? Answer is yes. As we aim to Rent the property immediately. ( Fingers crossed )

Can I afford this in 3 years to come should I lose my job ? Answer Yes as the wife will be in full time work ( Youngest goes to school)

The wife current works part time. Current property livings costs are low , compared to what we will be moving to - 5 bed home , More to heat , More to decorate etc. more costs. I know they will double with what we are paying now.

If we sell and transfer the larger deposit we will have a lower rate on the £170K with a deposit of £50K.

So the debate we are having every night now is >>

Should we Sell and move

or

Rent and Move

Thank you all in advance !!!!

angelsmomma

Renting out the property is a business decision, will the mortgage company give you consent to let? what if your tenant doesn't pay the rent and refuses to move out incurring eviction costs. What if the tenants boiler breaks and you have to find over £1000 to fix it. You also need to factor in that the rental income is taxable.

I am a landlady and have decent tenants but it is not easy money. I am with your wife on this I think you should sell and use the money for a bigger deposit

I_Beat_the_system

angelsmomma wrote: »

Renting out the property is a business decision, will the mortgage company give you consent to let? what if your tenant doesn't pay the rent and refuses to move out incurring eviction costs. What if the tenants boiler breaks and you have to find over £1000 to fix it. You also need to factor in that the rental income is taxable.

We have 3 children eldest being 12 this year, We know how tough it is now to get on the property ladder , god knows how hard it will be in the future. It would be good to pass the house over to one of the children. and thats only another 8 - 11 yrs away.

We have loads of good quality contacts for rental -and yes it will need to be looked at with the mortgage provider. The house itself is in excellent condition bolier , windows , roof et. but i do hear what your saying.

Thats another discussion with the wife - Should we go down the rental path - private or managed . - Im not ready for that conversation yet.

so 1 to the wife then.

El_Torro

Your house is worth £102k and you have a £44k mortgage. You can leave £25.5k in the house (25% deposit) and use the remaining £32.5k to up the deposit on your next house.

If you think the numbers stack up I would be tempted to keep your current property as a buy to let. There are risks involved but that's what letting agents and landlord's insurance are for.

It also depends on what other savings and investments you have. Would you be better off putting more money into your pension? Or a Stocks and Shares ISA? It's up to you to decide really but from what you've said it looks like you could easily go down the buy to let option if that's what you want to do.

Thrugelmir

There's a financial association between you and your wife. No avoiding that fact.

If you were to sell your current property and use the equity to clear any outstanding debt. How much could you afford to put down as a deposit on the next property?

I_Beat_the_system

El_Torro wrote: »

Your house is worth £102k and you have a £44k mortgage. You can leave £25.5k in the house (25% deposit) and use the remaining £32.5k to up the deposit on your next house.

Cant take any money out of the house as its in the wifes name , no income. I'm basically paying for all the running costs of the current home. In 6 yrs time we could that - Repair her credit file, Full time work in 3 yrs , But not its not an option.

I_Beat_the_system

Thrugelmir wrote: »

There's a financial association between you and your wife. No avoiding that fact.

I agree -

Thrugelmir wrote: »

If you were to sell your current property and use the equity to clear any outstanding debt. How much could you afford to put down as a deposit on the next property?

If we sell the current home at £102K clear the NR mortgage £44K leaves us with 51K ish minus fees going forward. So deposit would be on the £50K mark. And if that was the case id go for a property at £185K Plus fees etc.

Thrugelmir

I_Beat_the_system wrote: »

If we sell the current home at £102K clear the NR mortgage £44K leaves us with 51K ish minus fees going forward. So deposit would be on the £50K mark. And if that was the case id go for a property at £185K Plus fees etc.

Then that may well be your best option to consider.

Daniel54

I think your plan is much riskier than you allow for,particulary bearing in mind the low rental return and your very high gearing on the new property.

So I am with your wife on this one and would focus on affordabiltiy of your family home and eventually paying off that one mortgage

I_Beat_the_system

Daniel54 wrote: »

I think your plan is much riskier than you allow for,particulary bearing in mind the low rental return and your very high gearing on the new property.

I suppose i'm not doing it for the rental income , Its more of future security - With 3 kids property ladder for them will be hard - and als in 3 yrs double income coming in when the wife starts working full time.

£44K left, And it s decent property in a decent area proper family 3 bed home, gardens the lot. 3 yrs down the line it could be worth another 5K.

I_Beat_the_system

We ended up Selling and cashing in , - We decided Not to rent , and put all the monies in to the new home.

Much better that way.

Thank you all