Sell house and rent to be debt free?

julsxx

Thanks, I had problems getting my current mortgage (had to put my son on it), so dont think I would be able to get another mortgage at my age and a 1 bed flat in my area is not much cheaper than my house at the moment.

julsxx

Thanks, no not looking at benefits paying rent just my wages and topping with the equity/interest in the bank.

Bossypants

Selling doesn't seem like it would be in your favour, either short term (because renting will cost you more than your mortgage), or longterm (because you will be depriving yourself of a valuable asset which you may struggle to recover if your situation improves later on).

Some alternatives to selling outright might be:

- Get a lodger or two to help cover the bills
- Get consent to let from your lender, let your house out and rent something smaller/cheaper for yourself until your finances improve (NB your lender may only grant consent to let for a fixed period, e.g. 12 months, so if you go with this option long term you may eventually need to switch to a buy to let mortgage)

[Deleted User]

When do you plan to move abroad? You might get a price advantage by selling at your leisure, rather than in a rush as your flight looms closer. This may even outweigh the cost of the renting, but you'd have to do your own maths on that!

I think you should ask on the savings board about getting the most from your savings, if you do end up selling.

MerrilyA

It'll be good to look into how you earn income without necessarily having to sell your house. As mentioned, you'd really want to look into a sustainable means of getting income because the equity you get will eventually come to an end. You want to be able to live comfortably in your older years, it's really worth having a good think about that.

Cakeguts

Look for a 1 bed or studio retirement property for over 55s these are often cheaper than non retirement properties. Don't buy new. Or go into rented now and hope to get an over 60s council retirement property. The ones suitable for a single person often don't have much of a waiting list. You don't have to be retired just over the age limit.

AdrianC

julsxx wrote: »

Also, where do I keep the equity so that the tax man doesnt take a chunk of it, as you can only put 15,000 in an isa.

You never pay tax on any capital you may have - but you do pay tax on the INCOME it generates. An ISA is just a wrapper for some of your savings that means you don't pay income tax on them.

As of this tax year, there is no income tax on the first £1,000 of income from your savings. So an ISA becomes less appealing anyway.

If you have £100,000 of equity, and you are getting 3% return on it, you'll be getting £3,000 of interest. On that, you'll be paying 20% income tax on £2,000 - so £400. Putting £15,000 into an ISA, assuming the same return, would mean you would pay £90 less tax. So, at the end of the first year, your £100,000 would have become £102.600 or £102,690.

HappyMJ

I let my house out so I could save money by renting.

I own a 3 bedroom house which is far too big for my needs and it's in the wrong location requiring me to own a car or use taxis on a daily basis. I rent it out to a family for £600 a month.

I rent a 2 bedroom flat which is just right and exactly suitable for our needs. It's in the right location. It's very energy efficient. The gas/electric only comes to £41 a month. The council tax is also cheaper being band B instead of C.

I could sell and downsize but this flat is much cheaper to rent than to own. It's £475 a month to rent and includes service charges and maintenance. As I'm self employed mortgages are almost impossible to obtain so all funding would have to come from my credit cards (0% on balance transfers) and personal loans.

I don't expect to live in it for much more than a few years. It's just not worth buying so I won't.

AdrianC

HappyMJ wrote: »

I let my house out so I could save money by renting.

I own a 3 bedroom house which is far too big for my needs and it's in the wrong location requiring me to own a car or use taxis on a daily basis. I rent it out to a family for £600 a month.

I rent a 2 bedroom flat which is just right and exactly suitable for our needs. It's in the right location. It's very energy efficient. The gas/electric only comes to £41 a month. The council tax is also cheaper being band B instead of C.

I could sell and downsize but this flat is much cheaper to rent than to own. It's £475 a month to rent and includes service charges and maintenance. As I'm self employed mortgages are almost impossible to obtain so all funding would have to come from my credit cards (0% on balance transfers) and personal loans.

I don't expect to live in it for much more than a few years. It's just not worth buying so I won't.

I hope you aren't forgetting about the costs of renting it out - buildings insurance, gas safety certificate, income tax, CGT on any increase in value...

HappyMJ

AdrianC wrote: »

I hope you aren't forgetting about the costs of renting it out - buildings insurance, gas safety certificate, income tax, CGT on any increase in value...

No I'm not.

Buildings insurance should be taken out whether it's lived in or let out so there should be no additional cost there.

Gas safety certificates are very similar in cost to the annual service that a home owner should carry out every year so no real additional cost. Anyway, that's only £55 plus VAT - £66 per year. Less than 1% of the annual rent.

I do not pay any income tax on the rent. Any profit I make (which is only £30 per month) is well within my annual personal allowance and if it wasn't the tax would only be £6 per month.

I'm well within the CGT limits and do not foresee a CGT bill for many years.