Sell or buy to let

V_R_Street

I'm in the process of selling my flat for 330k and have 230k equity in the flat

In addition I have savings £180K from an inheritance. I have now put in an offer on a house for 420k which is a bit of a fixer upper.

My mortgage broker has obtained me a mortgage offer for 150k with Skipton for 1.9% fixed for 2 years. Initially I had wanted a 200k as I was looking more expensive properties but due to having an old CCJ my broker said that they would only give me 150k. ( ccj is over 5 years old and was satisfied within 2 months)

My dilemma is that the buyer of the flat is now asking for a reduction of 5K due to a couple of s20 notices for future works. Im not happy about this as i feel they are getting it at a really good price with new kitchen and bathroom put in only a couple of months ago.

Most people are advising me to now keep the flat especially since i dont have a pension but im worried it would be difficult to get an additional buy to let mortgage given my current credit history as i would want to release 100k from my current equity to go ahead with purchasing the house.

Is keeping the flat as a pension a good idea ?

Alternatively I could cancel both sale and purchase and wait until next year when the CCJ disappears from my credit file

Or proceed and take the 5K loss

My current broker said the underwriters may be concerned about the risk of two mortgages given my credit history . Plus id have to pay an extra 10K in stamp duty.

Im a bit wary of approaching another mortgage broker as i dont want a lot of searches or a possible decline on my credit file.

Any advice would be appreciated

PS I am single with no dependent children and earn 50k a year.

Thrugelmir

How much do you want the house?

Keep the flat and you are going to incur £5k of outgoings in any event.

Pensions are far more tax efficient than property. If you've no pension provision at all having your entire wealth in property i.e. one asset class isn't recommended.

AnotherJoe

Whether or not your current proposed buyer is offering £5k less than you want should be absolutely immaterial as to whether you should let the flat out.

As a matter of interest, £5k will be considerably less than the extra 3% SDLT you'll have to pay out on your proposed purchase.

brit1234

Also take into the consideration all the buy to let tax changes coming in over the next 4 years starting this April. Then you have the BOE B2L lending rules about to come in and hinted tonight further action on B2L from them.

A £5k drop in asking prices in this market with Brexit is pretty good. You may be able to recoup it back in haggling down the price you pay on your new home.

As for your pension, start a pension scheme now, the sooner the better. As said above leave all your retirement assets in just property is a dangerous idea as property values can fall just like now in central London.

V_R_Street

Thanks for the replies to date but it really wasn't really about the 5k as that short term although a little peeved as they really are getting a good deal and id also save the 3% estate agents fees !!! If i didn't sell .....but my post was more about what my chances were about getting a to buy to let mortgage given my credit history and also whether keeping the flat was a good pension option as im 45 and dont have one, as previously self employed until last year.

However will have to research what pension scheme would give me a good return.

Thanks

Typhoon2000

You best ask your mortgage broker about you chances for getting a buy to let mortgage. Santander have deal on their intermediaries site for people letting their existing home to Buy their new home with their BTL arm but there are others.

If you decide to keep the flat, the most tax efficient way, especially considering the forthcoming tax changes to relief on BTL properties would be to pay off your mortgage on the flat now with your inheritance.
Then when you introduce your flat into a business ( which is what letting is) you will be entitled to claim interest tax relief for borrowings up to the full value of your flat (£330k or more ) rather than the amount of your new BTL mortgage (200k). The additional £130k worth of interest tax relief will be from your borrowing to obtain your main home (at 1.9%, which may be lower than your BTL interest but everything helps). This will also mitigate the forthcoming tapered reduction in interest tax relief for BTL properties.
So for example if the valuer reckons your flat is worth 400k and your BTL mortgage is £200k you will be effectively getting 200% interest tax relief on the BTL to start (assuming your new house interest rate is the same) gradually tapering down to 100% as the new tax changes are brought in.