Mortgage advice

mvarrier

Thanks in advance for your consideration.

I bought a 2 bedroom flat in London in 2006 for £214,000 and have £155,000 outstanding. I currently have a decent mortgage deal (base rate +1.5% lifetime tracker). I would currently sell for around £350,000 (prices have gone silly where I live)

At some point we will need to move to a family home. We would move to a cheaper area but are still looking at around £500,000.

The simplest thing would be to sell and use the difference as equity in a new home. My wife is very keen that we keep the current property as an investment. It is a good rental area and I would expect to get £1200 a month. I am concerned regarding 1. the hassle 2. periods of emptiness 3. damage to the property 4. increased costs of transferring to a BTL mortgage 5. impact of capital gains.

In addition, the £30,000 or so we currently have in savings wouldn't allow us to get a good mortgage on a £500,000 home.

I'm not clear about the options for borrowing against the flat for the second home or what methods are employable to make it maximally tax efficient (we are both PAYE NHS employees).

Any thoughts appreciated.

Thanks.

Thrugelmir

On the basis that it was available. Is a £470k mortgage affordable?

At 7% rates monthly repayments on a 25 year term would be around £3,320.

mvarrier

This is true. Yes 3320 is likely to be affordable by the time rates got that high. Whether the house I bought or the flat I still owned would be worth what they are now is questionable...

getmore4less

Start with the flat the rental yield is very low.
is that going to be a viable business?
might be it will be breakeven and you are dependent on more house price rises to make money.

Foreign investment is likely to continue for some time so no down turn yet.

amnblog

A general difference in point of view on the rental. Your wife is keen, you are not at all comfortable.

In our experience in these cases the wife usually wins!

Your get out is that your intended deposit if you keep the current property is too low for sensible mortgage options on a £500,000 purchase.

Don't tell your wife, but you could raise extra deposit on the current property to put down on the new property.

Get some advice from an experienced mortgage broker before you decide on the sell or rent option.

getmore4less

There is the port + topup from existing lender with a raising of capital on the current place.

if you can get £ that's 4% yield £1200pm rent. is very low for the current risk of rate rises.

mvarrier

Thanks for the thoughts.

I think that professional advice is probably the key. I would like to see what happens to the market after the first interest rate rise (as small as that may be) and have time to wait.