Would I be silly to not keep flat as a property to let?

RockTheShack

Hi,

*Apologies if this question has been covered in a previous thread*

Basically me and my fiance live in a flat that I own with a small mortgage left on it. We're planning to move in the next year to somewhere bigger. From basic online research and my limited financial knowledge it seems that the two options are to either sell and be able to buy a larger property with 50% LTV mortgage in a really good area and use our savings to make improvements, or, pay off the remaining mortgage on current flat to let out and use our savings to put down a deposit on a larger flat in a cheaper area with a 10-20% deposit.

I'm leaning more towards selling and getting somewhere we really want without the hassle of being a landlord, but concerned that it would be better to keep the property as an investment in the longer term.

I'm planning on seeking advice from an IFA / mortgage broker but would be interested to hear what other MSE users would do, or if there are any other options to consider before I go to them.

Key info -

- £20k left to pay on an interest-only mortgage. I haven't had the property valued yet but would hope it would sell for about £160k.

- the demand for rental properties in the area is pretty high and I would expect that letting it out it could get £650-800pcm.

- I have around £35,000 in savings (mainly inheritance which was until recently getting a higher interest rate than mortgage), fiance has about £15,000 to contribute to a deposit.

Thanks in advance!

G_M

If you decide to keep the flat and let it out, why pay off the mortgage? The mortgage interest payments are tax deductable (against rental income).

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jennifernil

If you do decide to keep it, you could remortgage on a BTL mortgage and use that to put down a bigger deposit on your new property, thus probably getting a better rate.

Interest on the BTL mortgage can be set against the rental income to reduce tax, so you need to do the sums to work out any advantages/disadvantages.

Having now had 2 years experience of helping our daughter with a flat she decided to retain and rent out, there can be a bit of hassle and work involved, so I am meantime "on the fence" as regards the best course of action.