Buying house, what to do with my flat?

kevinx_green

Hi, okay so I am looking for some advice on this situation:


I am currently looking to move home and wonder how I should deal with my flat which I purchased nearly 7 years ago, November 2007. I was a naive 20 year old, everyone told me to get on the property ladder asap; "property will only ever go up in value" they said! Anyway, I jumped in head first. And I got 100% mortgages thrown at me from everybody and anybody.... 7 years later I am much more financially capable, secure and sensible, yet much more worried about the implications of moving home....


I know from local market I would struggle to sell but would have no problem letting....however the mortgage company has to change me to a 'buy to let' mortgage which nearly doubles my current payments. Rental income would cover my current mortgage and a small bit more. However with the buy to let mortgage needed I would be just as well leaving my property empty and paying the current mortgage.


To offset any negative equity would also mean using a chunk of what I have set aside for deposit for my new home.


My mortgage at the moment is small and I could afford to pay this no problem along with new mortgage until I was in a position to sell, but does this affect any application for another mortgage, if they see me as having a property which I have to pay for being left empty?


Any opinions or advice would be appreciated.


regards,


Kev.

agrinnall

Doesn't sound like letting is a sensible option, and leaving it empty but still mortgaged is a waste of money and will severely restrict your ability to borrow for another property. Selling is the way to go, even if it takes a while.

cattie

What part of the country are you in? I only ask as down south prices have increased vastly over the past few months, so it could be only a matter of time before this upturn spreads to other parts of the country.

If you got more for your flat you could find that you're no longer in negative equity & make a bit of profit too.

Although if property prices do increase, it'll mean your next one will cost more than it would in the current market, but you'd no doubt feel better that you were able to clear the mortgage on your flat from sale proceeds rather than having to dip into precious savings to do so.

G_M

kevinx_green wrote: »

.......however the mortgage company has to change me to a 'buy to let' mortgage which nearly doubles my current payments.


Kev.

Who is your lender? Have you asked them about 'Consent to Let'? This tends to be much cheaper than BTL. Indeed some lenders grant CTL at no extra cost, or just a one-off £50 admin fee.

I accept you are probobly stuck with your current lender (no new lender will grant you a BTL mortgage if you are in negative equity), but doubling the repayments sounds extreme. Might they agree to move you to an interest only BTL if CTL is not available?

BitterAndTwisted

If you have savings I can't see the sense in using that for a deposit on a new property when the current one is in negative equity.

Pay down the neg. equity and then sell the flat, even if it means continuing to live there until you've built your savings up again.

kevinx_green

G_M wrote: »

Who is your lender? Have you asked them about 'Consent to Let'? This tends to be much cheaper than BTL. Indeed some lenders grant CTL at no extra cost, or just a one-off £50 admin fee.

I accept you are probobly stuck with your current lender (no new lender will grant you a BTL mortgage if you are in negative equity), but doubling the repayments sounds extreme. Might they agree to move you to an interest only BTL if CTL is not available?

Yes you indeed make a good point and I was not aware of a "consent to let" option ill look into that, I guess that is meant to be temporary? It is Cheltenham & Gloucester who I am with, well the reason it nearly doubles is because, at the time I got the mortgage it was 5.9% rate, for two years reverting to 2% above the bank of England base rate for remainder of the term.... at the time obviously this wasn't a good deal but as it turns out it was worth staying with this and ive had that for the past 5 years!

kevinx_green

BitterAndTwisted wrote: »

If you have savings I can't see the sense in using that for a deposit on a new property when the current one is in negative equity.

Pay down the neg. equity and then sell the flat, even if it means continuing to live there until you've built your savings up again.

Yes I know, that is financially the sensible thing to do, however how long will that take - I don't know. And in the mean time my life is on hold. This flat was bought 7 years ago when my priorities were a place for me and my mates to drink a few beers before going into town. kick back and watch the football/boxing/ufc with beer and pizza! And it is indeed very suitable for that!!


But priorities change, im living with my girl now of four years, and while we are living here all considerations like starting a family are on hold. Not that we are in a hurry but would like to be in a new place a couple years before thinking of anything like that... and we are both pushing 30 now!! I just feel this is holding my life back, If I simply could not afford to move then fine it wouldn't be even a consideration. but why put our lives on hold any longer for this bloo*y flat I bought when I was 20! I will be moving this year, although I know financially not ideal, however prices for the larger properties that I am looking at will also increase while I wait for my own flat value to recover....

kevinx_green

cattie wrote: »

What part of the country are you in? I only ask as down south prices have increased vastly over the past few months, so it could be only a matter of time before this upturn spreads to other parts of the country.

If you got more for your flat you could find that you're no longer in negative equity & make a bit of profit too.

Although if property prices do increase, it'll mean your next one will cost more than it would in the current market, but you'd no doubt feel better that you were able to clear the mortgage on your flat from sale proceeds rather than having to dip into precious savings to do so.

Im in Falkirk, central Scotland. yes but I do not know if waiting for prices to recover is to good an idea as I am looking at properties worth at least twice as much as my little flat so any increase in my flat value would be wiped out doubly when I move. Id like to move this year before that increase you stated reaches my part of the country!!


I know its a Sh*t situation but ive made the decision I need to move this year, Im just trying to figure the best way to go about it.


Hopefully going to see a financial advisor next week so see what thay have to say.


Thanks for all the replies folks.

G_M

kevinx_green wrote: »

Yes you indeed make a good point and I was not aware of a "consent to let" option ill look into that, I guess that is meant to be temporary? It is Cheltenham & Gloucester who I am with,....

CTL is basically granted to home-owners who want to let their home for a period, typically to work aborad or elswhere in the UK, so yes, it is usually granted for 12 or 24 months initially. I can sometimes then be renewed.

However if the lender believes you are letting long-term as a business (eg you have bought a new home and clearly do not intend to return), then they will decline CTL.

BitterAndTwisted

You've made one unfortunate financial decision in the past which is still lingering like a bad smell. Don't make that two. Presumably you have two salaries coming in, so live on one and pay down the mortgage with the other one until you're out of negative equity. Two lots of debt are never better than just the one