Selling up to Rent?

Webbigail

The debt free wannabe board recommend I post here...


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.

agrinnall

It sounds sensible to me as long as you are sure that you will have the discipline to save every month because your deposit is going to be vital. You should think about the sort of property you might want to buy in a few years and what the mortgage on that is likely to be at interest rates that may have gone up by then.

Webbigail

Thanks for your reply.


With the depost that we save we could in theory buy the exact same property we have now with repayments of £1100 per month and no outstanding debt. I really feel that this would impreove our quality of life massively.


I think we bought at the wrong time and went with the wrong attitude into our mortgage - 100% mortgage at the height of the "boom" we have literally lived for 8 years trying to get out of negative equity.

Ozzuk

I would only comment that at least now you have an hopefully appreciating asset. Many will try but no-one knows for sure what will happen to house prices/rate but I'd think hard before stepping off the property ladder just to rejoin in a few years.

If it was me, I'd explore all other options first, remortgage, refinancing, better jobs (easier said than done I know) etc and leave my main asset alone as long as possible.

Look at it another way, a percentage of your mortgage is at least going back into your pocket as you pay chunks off, if you rent, 100% of that is going into someone else's pocket.

Sorry, one thing to add, I find the more income you free up the more reasons you find to spend...

Rambosmum

My concern would be whether you would actually save the money, or whether it would end up being spent.

Also, what were the reasons you got in to debt? Have you addressed these and are you likely to get in to debt in the future?

Have you had a proper look at rental prices, for the area and property you would need?

Is there any chance that remortgaging would reduce your repayments or that down sizing or getting a lodger would work for you?

mustang121

I agree with the others. It seems madness to sell a house and go back to renting. What will you have to show for all those years of renting?


I personally would rather have a lodger or downsize to a smaller house.


At least downsizing would still leave you with a valuable asset and possibly more disposable income.


What's the obsession with buying/renting big houses? End of the day you buy to what you can afford.

ruggedtoast

Your rent might be £1000 per month now but it certainly won't be in a few years, itll potentially be much more than that. Also with the insecure tenure of ASTs you could have had to move several times adding all that heart ache and agency fees on top.

If you are finishing each month twenty pounds ahead and are paying down your mortgage on an appreciating asset then you have achieved Dickens' definition of being happy.

I would personally look at trying to raise my income rather than selling my house unless you have no other option.

squeeks

I would explore remortgaging at a lower rate.

Despite popular beliefs, houses can go down as well as up... They also cost money to maintain, so moving into rental isn't a daft idea if things are tight.

If you are finding the situation stressful, then it is definitely worth exploring the alternatives.

Kynthia

You should take the child maintenance figure out of the 1200 as when that ends you'll be better off whether you are renting or own.

As others have said will you actually save that money, you'll have selling costs plus moving costs and renting reference and credit check costs. Plus if house prices are rising the time you spend renting is time you are losing out on equity and will have to pay more for the next house, plus you'll have buying costs to pay for including stamp duty. I think your plan to sell, rent, and then re-buy might be cheaper monthly payments will costs you thousands extra in savings meaning you'll be worse off.

I personally would look to remortgage in order to pay off some of the loans and possibly reduce your repayments if the rate is good.

freeisgood

Maybe doing a SOA for us to see, will help us see where you could save/free up money per month?

(PS If I had bought, I would do almost anything to keep the property, rather than risk not ever getting on the housing ladder ever again, that's just me mind)

Webbigail

Thank you for all your replies, this has given me food for thought.


I don't think we would be able to re-mortgage as the loan to value doesn't stack up. NRAM don't offer anything so we are I'm afraid stuck with them for the foreseeable.


I can only see our mortgage payments coming down if we make over payments ....cash we just don't have and wont have for a number of years whilst we pay the minimum repayments of our c/cards.


This certainly isn't something we will jump into lightly, hence posting on here for other views on our situation.


Have any of you been in a similar situation?