Selling Up to Rent??

Webbigail

Hiya,


I will try and keep this as simple as possible and would really appreciate any advice.


We are 8 years into a 30 year mortgage with NRAM, it was a 100% jobby with unsecured loan attached. We bought when house prices were high and have only just started to come out of negative equity. We also have some other debt which I will go into. Here's how the figures look:


Mortgage: £246K
Other debts: £26K
Property Value £270K


We are currently left with about £20 per month after everything has gone out (bills, food, mortgage, school clubs etc) I find this extremely stressful and feel that we have been in a constant battle since we moved into the property. Our Mortgage payment per month is £1483. We can rent the exact same property for 1K per month.


We are considering selling and paying off as much as possible and renting. A scary prospect but I think we will have a much better quality of life. We will be £1200 per month better off and will have around 5K of debt (after agent fees). The £1200 will be made up of cleared debt, reduced rent payment and also we will no longer be paying child maintenance as of Sept.


I'm thinking, pay off the remaining 5K over 5 months then save a minimum of £1K per month for 3-4 years then use this deposit to get back on the ladder. We never had a deposit when we first bought.


Am I out of my mind?? What are the flaws? I plan to be buying again aged 40 and taking a 20 year mortgage...A clean slate is really appealing.


Thanks in advance

National_Debtline

Hi Webbigail


I can't offer you too much in the way of advice on which way you should go, but these are some factors to bear in mind.


- Is your mortgage on a fixed rate? With interest rates at a historic low, they can only go up in the future and this could then impact on the cost of your existing mortgage repayments.


- Is the £246K figure inclusive of the unsecured NRAM loan, or is that incorporated into the £26K figure for "other debts"? Either way the values of the property and debts just about balance out, but the more you come away with from selling, the greater your choices.


It does sound like you've costed this plan quite carefully, and that can only help you make an informed decision.


Best of luck with your plans.


Dennis
@natdebtline

Red-Squirrel_2

Are you on a fixed rate? What are your credit scores like?

Is it not possible to remortgage onto a better deal that would cut your monthly payment or to move to a cheaper property but still own rather than rent?

Westminster

OP is probably on the loyalty SVR of 4.54% and NRAM are not issuing any new loans so no remortgage with them is possible.

Have you factored into your plans the probable deposit you are likely to be asked for when you try and rent (I'm guessing its something like 6 weeks deposit and 1 month in advance but it could be worse than that)

Also it is highly likely to take at least 3 months from listing your property to completing on the sale - just something else to be aware of incase you hadn't considered that.

ReadingTim

Suggest you also post on the house buying, renting and selling board, here as you might get a more detailed answer - you should also consider the local market and its chances of recovery - the danger is that having bought near the peak of the market and weathered the worst of the storm at the bottom, you sell low when prices are rising.

This board is probably more useful for posting an SOA to minimise your outgoings to give you a bit more disposable income every month, and make the mortgage payments less of a stress. However, it is worth considering whether you'd prefer to invest £1500 pcm in your future wealth, or £1000 pcm in someone else's....?

Webbigail

Thank you for your replies. Yes the unsecured loan has been included in the mortgage figure. We cannot remortgage with NRAM as they hpare not offering anything to new or existing customer.

Our value to loan amount isnt enough to get a mortgage elsewhere. Obviously i would prefer to be paying £1500 into my own property rather then £1000 into a rental but this does mean no spare cash for the foreseable and no way of clering the other debts as we cannot make overpayments. By renting we would be able to put £1k into savings per month to use as a deposit in 3/4 years time....

Am i selling the idea yet? Or just trying to convince myself??!! We have 2 estate agents coming tomorrow to value the property, at least that way we will know whether its a viable option.

I am also taking into consideration the stress factor of staying put. Im not sure i can continue with the constant worry and burden that this house (our decisions) have brought us ....

Savingdad

I think you would do better posting a statment of affairs and seeing if you can bring your out goings down a bit and then have a go at snowballing your other debts
Its tempting to clear everything but then you not only have to start saving a deposit from scratch again while paying someone else's morgage and the morgage rules on affordability have chwnged recently so you may struggle to get approved again.
In the meantime interest rates can only really go upwards and house prices will, on the whole, keep going up.
I know it seems its a huge struggle right now but finding a way to cut a few £100 from your spending while trying to earn a few more would be my choice.
You say CSA payments end soon so that will free up a bit more and its surprising how much you can squeeze out of the purse sometimes.

Webbigail

Thanks Saving Dad, I will post an SOA over the weekend. Yes I think I could shave about £150 off per month but I don't think that's enough to help clear our debts.


We currently repay in the region of £800 per month on debts plus the mortgage and unsecured loan of £1483.


If we were to walk away now and start a clean slate we would be able to save a minimum of £1K per month. So in for years we would have 48K deposit to start again. If we stay where we are would we are, in 4 years time would we have another 48K equity...I don't think so, and we would still have all the debts?


My head hurts!!!!