Inherited a house, what is for the best?

Retro82

My sister and I have inherited a house from a relative. I had hoped this wasn't something we needed to consider straight away but our solicitor has advised it is something we at least need to think about soon.

Obviously we must come to a joint decision but I'd really appreciate some thoughts on my options. I'll only explain my own circumstances, not my sister's.

My partner and I own our own home with mortgage (rough value £300,000 with £200,000 to pay).

Inherited house also valued at roughly £300,000 and would bring in a rental income of £1200 pcm

It's a nice house but neither my sister or I would like to live there so one buying the other out is not really an option, even though it would be the only mortgage free option!!

So...
*Rent house? stressful being a landlord? Could sell later down the line?
*Sell house and buy similarly priced flat? supposedly better rental income - up to £1500 but the added stress of buying and selling
*Sell house and pay of some of our mortgage? We are happy here atm but would be looking to move in 2-3 years. Also there would be some kind of penalty for doing this
*Sell house and our flat and put towards buying a house? In this area this would require us to take out a mortgage of at least the same size of our current one. We are by no means struggling but we would have no greater financial freedom than we currently do and I wouldn't want to feel vulnerable to interest rates going up etc - this feels like it should be an opportunity to protect ourselves from all that. There'd also be a penalty for leaving our current mortgage early for the next two years.

I know it all comes down to our personal preferences but I would really appreciate some voices of experience on this one!

BitterAndTwisted

Paying down your current mortgage is not the same thing as "leaving your current mortgage". You retain the same product but just owe less on it. Like 150 grand's-worth of less. Nice place to be.

I wouldn't advise you to get into the landlording game unless it has always been part of your long-term investment plans.

Kynthia

Another option is to sell the house, speak to a financial advisor about how to safely invest the proceeds, put more money into your pensions, but release some monies to pay down your mortgage once the ERC is passed. Then your mortgage will be much smaller, protecting you from any mortgage interest hikes and the large amount if equity will be a good deposit should you move.

Retro82

BitterAndTwisted wrote: »

Paying down your current mortgage is not the same thing as "leaving your current mortgage". You retain the same product but just owe less on it. Like 150 grand's-worth of less. Nice place to be.

I wouldn't advise you to get into the landlording game unless it has always been part of your long-term investment plans.

Yes, of course - I think I've got 'early repayment fee' in my head.

I hadn't intended to be a landlord but the income is obviously appealing and I keep thinking, I could rent for a while and then sell later, but I can't change my mind and rent once I've sold!

I guess this might all come down to 'how much does it suck to be a landlord?'

Peter333

Yes if it were me, I would sell, and take your £150K and pay off most of the rest of your mortgage! A £300K house, with a £50K mortgage. Nice.

Retro82

Peter333 wrote: »

Yes if it were me, I would sell, and take your £150K and pay off most of the rest of your mortgage! A £300K house, with a £50K mortgage. Nice.

Yes, and even if we sell in a couple of years that £150,000 the flat's value should still have gone up enough to have made it a good investment!

We'll still only halfway through our initial three year fixed rate, I'll have to check if there's any kind of maximum overpayment etc.

Cheeky_Monkey

^^^^^^^ me too! (peter333's reply)

The other thing you need to consider is that your sister, as joint owner, will also be the landlord. Is that something she wants to do?

Retro82

Cheeky_Monkey wrote: »

^^^^^^^ me too! (peter333's reply)

The other thing you need to consider is that your sister, as joint owner, will also be the landlord. Is that something she wants to do?

Of course, she will obviously have her own pros and cons for all these things but I'm selfishly trying to work out my situation first and then seeing how it fits with hers!

Argghhh

if you look after the rental property yourself you might make some money per month but then you pay tax on what you earn at whatever tax band you are currently in and would be put into with the rent added to your income. If someone manages it for you, by the time you have paid all the charges, i found it wasnt worth the hassle and changed my mind

Retro82

Argghhh wrote: »

if you look after the rental property yourself you might make some money per month but then you pay tax on what you earn at whatever tax band you are currently in and would be put into with the rent added to your income. If someone manages it for you, by the time you have paid all the charges, i found it wasnt worth the hassle and changed my mind

Thank you. I think I need to get out of the notion than rent is easy money!

I guess it depends how much our monthly repayments go down if we pay off a huge chunk!

Argghhh

i worked it out that after tax from a £450 rent using all tax deductables etc i would make approx £83 a month profit in my hand, that is before something goes wrong like a bad tenant or a boiler packing up or something