Best to rent out or pay off mortgage?

JWCheshire

We have second house worth around £90k and mortgage on current house left to run is about the same... we are not sure whether to sell house and use money to pay off mortgage or whether to rent the other house for next 7-8 years whilst still working and then sell house. Problem is that rent would be around £500/month at a guess and tax-man would have a large share of this. Plan to seek some financial help but would appreciate any thoughts first so that we can ask the right sort of questions. THANKS!

Thrugelmir

Do you want to run a business and be a LL?

Letting property isn't for everyone. Nor are all tenants well behaved.

You need to work out the potential return after all costs. Maintaining a property in good saleable condition costs money over the years.

JWCheshire

It is in good condition at the moment and no we don't really want to be landlords but wanted to know if selling it off to pay off the current mortgage was going to lose me a lot of money as no idea really how to work it all out as I guess rent would be taxable and there would be costs and I know it could be a retirement income but we are currently paying out over £1000 per month in mortgage so on paper to me it looks as though we are going to lose money by not selling it off... but wanted to understand the calculations I should be doing to make sure we are doing the right thing... if you see what I mean.

engineer_amy

you may need to consider if there is any capital gain on the second home....tax on that might reduce what you can pay off the mortgage. is there a gap between what you bought it for and current value? The current allowance is £11000 then 18 or 28% tax depending on your current income tax band.

JWCheshire

The house was bought 2 years ago to let my sons live in it and they are both now moving away. I don't think the current value would be a great deal higher than what we paid and perhaps £8-10k at the most if that but we did wonder whether it was better financially to keep hold of it and rent it out or just sell it.

dimbo61

Buying and selling costs money in estate agents, legals, etc So I guess you will make little if any profit unless the property has increased in value Big Style ( down south/London)
Being a Landlord is not all plain sailing and I guess that the rent will only just cover the mortgage never mind Letting agents fees, repairs, insurance, gas safe certificate etc
You get Tax relief on the Interest only part of any mortgage not the full repayment part you may well be paying ?
If you sell up and only make a small profit you have little if Any CGT to pay and save the worry and mortgage costs+maintenance of 2 properties.
Your Call Mr Landlord !

mortgage_banker

The answer to this question depends on many factors. If the individual is retired, in financial trouble, looking to lower their monthly expenses, or planning for retirement, it may affect the process in different ways.