Mortgage help...

dwill1503

We currently own a home worth 175k with a mortgage left of 96k. we rent this out and receive 845pm in rent. in turn, we rent the house we live in and pay 845pm.

we have 13k in debt and have had some arrears etc and not a good c/history.

ultimately we would like to buy a bigger house (value of £230k). we are wondering if we should sell the house, clear the debt and sit on the cash in the bank? we would like to buy a house when I return to full time work in 3 years time so would like to have a clear credit history by then, or at least on our way.

is this sensible? or should we try to get the bigger mortgage now with a sub-prime lender?

Thrugelmir

dwill1503 wrote: »

We currently own a home worth 175k with a mortgage left of 96k. we rent this out and receive 845pm in rent. in turn, we rent the house we live in and pay 845pm.

Are you declaring the rental income to the HMRC?

Why not move back into the property?

dwill1503

Yes, HMRC are aware.

Because the house is 12 miles away and not near school and work etc.

Foxy-Stoat_3

Use the profit of the rental, less costs, and clear down your debt and move into a cheaper house to rent for the next 3 years. In three years sell the rental and buy the house you want.

I wouldn't sit on any equity in cash of this amount for longer than 6 months as you may be in a worse position in 3 years time if house prices increase by more than the interest you could earn.

dwill1503

That is not an option foxy stoat. We cannot simply move area, we have children at school. The rent we receive is 845 and the rent we pay is 845. the mortgage is 480.

Foxy-Stoat_3

dwill1503 wrote: »

That is not an option foxy stoat. We cannot simply move area, we have children at school. The rent we receive is 845 and the rent we pay is 845. the mortgage is 480.

I meant rent a cheaper house in the same area, you will be able to clear down your debt quicker.

Your making £365 a month less tax, is that repayment residential mortgage with consent to let or BTL interest only?

dwill1503

residential with consent. no, we aren't making anything, the rent pays the rent.

Foxy-Stoat_3

Arrr yes I see now.

So you have tenants paying your repayment mortgage which allows you to rent a place in a nicer area? Unless you have some creative accounting you would be better off selling now and buying now, if the household income allows....Do you know how much of the capital is being paid off each month?

dwill1503

We cannot buy now as we need a mortgage for £160k which we have been told we won't get.

Foxy-Stoat_3

dwill1503 wrote: »

We cannot buy now as we need a mortgage for £160k which we have been told we won't get.

Is this because you are on a debt re-payment plan? When are you due to finish and be debt free?

In your case, best you sell your house, repay all your debts and invest what ever capital is left and try and build on that and hope that house prices don't rise too much in 3 years.

Your credit file will be clean in 6 years but hopefully you will be able to find a lender when you return to full time work in 3 years.

dwill1503

Thank you. When you say invest the capital what do you mean? Just invest in a savings account? It will be about £60k.