what is the best way forward in my situation

dontlikedebts

Hi everyone,

I am after some advice on what I should do regarding my living situation.

Until recently I was lodging at a friends which I was quite happy with but he needed the room back for his kids, which is fair enough, and I have moved back to the parents. Which is not my ideal situation being 30 something!

I myself own one property which I have been renting out as I didn't need all the space and was happy to lodge, for half the cost of what it was costing me living in my own place. The tenants I have now are no problem and I would feel bad about evicting them after just a year.

With my property the lease is getting lower (about 63 years) and another consideration I have is whether to extend that or not for a cost of nearly 20,000.

I currently have 50% equity in my property, 7000 in the bank and 13000 available on a cheque book facility with my mortgage. So I could in effect use this money to extend the lease.

At the end of the day my aim is to have one property paid off fully with no mortgage. I am not really interested in having multiple properties. I also dislike paying all sorts of fees to banks which are involved in re-mortgages!

So I can see the following options open to me:

1. I keep my property as it is, tenants are happy to stay, I can extend the lease if I want to with my spare money, this will make sure it stays at full market value. I rent privately a small one bedroom so I have my own space.

2. Sell the property whether as it is or with a lease extension as part of the deal. Evict tenants and use my money to buy somewhere else I want to live.

3. Re-mortgage my property as a buy to let, release more funds and buy a second property to live in, while leaving tenants happily renting mine. However, lots of fees with 2 new mortgages.

Those are the 3 main ways I can think to get to where I want to be, I am just not sure which one to choose! Would much appreciate any opinions.

cloo

In first instance, I might talk to Leasehold Advisory; as your lease has less than 80 years to run, I think there will be additional extension costs. Regards selling something will have to be done about the lease as I'm not sure lenders will lend on anywhere with under 70 years remaining.

I might clarify where you stand with the lease before making any more decisions: http://www.lease-advice.org

(NB, you may have to hold for a long time if you phone the, but they're worth speaking to when you get through)

Cheeky_Monkey

Are you saying that you have been letting your property out for the last 12 months on a residential mortgage rather than a Buy to Let mortgage?

McKneff

Maybe its just my age but I would go for option 2 every time.


No worries, no tenants, no repairs, a nice little house with a garden you can sit in during the year,
bliss......

dontlikedebts

Thanks for the replies so far, to answer the questions:
1. I am aware of the lease extension options if I extend, local agent said I can achieve full market value as long as an extension is part of the sale.
2. I have been on a consent to let residential mortgage
3. I understand where you're coming from mckneff, that sounds appealing.

stator

I can't think of a scenario where you wouldn't want to extend the lease, if you don't it's only going to need doing later. Better get on with it whilst you know the cost.

dontlikedebts

I have heard many different opinions on whether to extend the lease or not. Some people have said don't worry about it if you aren't planning to sell, it will outlive you, marriage value may one day be abolished making it a lot cheaper in future, etc. Other people have said I must do it asap to protect the asset value and make a sale a lot easier in the future.

If I were to extend the lease it would still leave all 3 of the options available to me, so in a way it is irrelevant to my original question. I would really welcome any more opinions on the 3 options outlined above, or any other options I may not have thought about. Thanks to those who have replied so far

stator

Personally I don't like the idea of evicting anyone, could you sell it as an investment with tenants in place?

dontlikedebts

Stator, that's an option, but is there any guarantee a new owner wouldn't issue a 2 month notice as soon as contracts were exchanged?

enthusiasticsaver

Are the tenants in a position to buy your house? Saves on estate agency fees. With regards to extending the lease and selling it on the open market you need to get valuations on what it is worth with just the 63 years remaining (assuming it is still mortgageable) and what it would be worth if the lease was extended and if the difference is more than the 20k cost it could be worth doing that.

stator

dontlikedebts wrote: »

Stator, that's an option, but is there any guarantee a new owner wouldn't issue a 2 month notice as soon as contracts were exchanged?

None, unless you offered them a 6/12 month AST before selling. But then you wouldn't feel guilty about it, it would be someone else being the bad guy.