Thinking of selling up and renting

moneyfly

Hello everyone. I'm looking for some other viewpoints on my current situation, just to make sure I'm not missing anything obvious.

We bought our house right before the big crash and have been in neg equity until a little while ago. I'm wanting to sell up and rent for a while and make a smarter purchase with the next house.

Bought house for: £115000 with a £109000 mortgage
Amount owed: £98000 (interest-only, but have been chipping away every so often)
Could sell for: Probably around £105 - £110000 (a house just up the road sold for 105000 recently)

House value increase potential: none really. We paid the most for our house on the street ever, and I can't really see these houses going up beyond what we paid. I can't add value by adding any rooms etc.

I know that we'd be making a loss, but we're in an area we no longer want to be in, and I think it's a good move to get out while we can before an interest rate rise or another market fall. Our increased income means we could rent (not buy yet) in an area we do like and wait it out until a good house comes up. Or just rent and invest in other ways.

Other than the car we have no other debt.

I just want shot of what I see as a debt timebomb and get out, but don't know if I'm missing a trick. Am I?!

Thanks!

Pixie5740

Do you have enough savings to cover the shortfall between the remaining mortgage and how much you can sell the property for?

moneyfly

Well, hopefully the house will sell for over what we owe. I reckon we'd get over 100000 for it and we owe 98000.

Hoploz

You're not in negative equity. Your mortgage owing is 98k and it's worth 105-110k. There is equity, just it is worth less than you paid.

Market is rising generally in the UK right now so to sell then wait while prices increase before making your next purchase is not the right move. You should hold on to yours until you can find something to buy.

If things are different in your particular area and prices are falling, that is the time to sell high and buy when prices have reduced.

If the real problem is you are having the heebigeebies and just want to permanently remove yourself from the market and rent rather than owning then that's different.

Bossypants

Is there any way you could get up to 25% of the current value paid off? Then you could let it out while renting for yourself in the area you want to live in.

Just a thought, it seems a shame to sell up having made no profit, and taking yourself off the ladder without it may make it hard to get back on.

moneyfly

I realise we're not in negative equity now, but we have been for pretty much a decade. It is the heebegeebies somewhat, as I just can't see this area going back to where it was, and I don't want to get trapped again.

I can't get hold of the cash right now to be able to rent this house.

Part of the issue is I feel I shouldn't have been let on the ladder in the first place and have been overstretched for ages, and am tempted to just cut loose.

I'm not too concerned about getting back on the ladder, as I'm only going to do that if it's a bargain and we can easily afford it.

We thought we were trapped in this house for ever, and now I have a way out I'm thinking of taking it. We got into this pickle by not seeking sensible advice, so I'm not making a move until I've heard some other opinions so I can balance my thoughts!

Bossypants

It sounds to me as if you've already decided what you need to do to make yourselves financially and even more importantly psychologically comfortable. If that's the case, and you have the means to achieve it (which you seem to do), then I say go for it. You seem to have more self-awareness than many regarding your situation, and that's a very valuable thing. Good luck!

Pixie5740

It does sound like you've made your mind up. Have you rented before? Are you prepared for the uncertainty of having to continuously move. I'm on my 4th property in 3.5 years and I'm having to move again.

moneyfly

My mind is fairly made up. I just want to make sure there's nothing I haven't considered.

I've rented before and while it's not perfect I'm quite preferring the idea of moving about and being 100% debt free than being trapped!

pinkshoes

How much is the interest on your mortgage each month?

How much would renting cost each month?

Personally I would NEVER go back into rental.

xylophone

You seem to have a child or children - do you really want the uncertainty of renting?

Do you know where you want to live? Is there property there which you can afford with a repayment mortgage?

If so, better to sell and buy, if necessary with a fixed rate mortgage for psychological comfort?