What are my options?

tadaska

I want to move to a different area as I really don't like living where I am now and I am looking to see what my options are.

At the moment I have a one bedroom flat. I bought it as a first time buyer. It was £96k and I did the 5% down payment and it was a 25 year mortgage. It's been just over 3 years since I bought it. Mortgage was fixed for 2 years and now it's a 10 year fixed as of a year ago. Outstanding balance £80k and early repayment is 5%. Monthly payments are £430 but the entire last year I have been overpaying by £400 (£830 total). The flat still needs a bit more redecorating (kitchen and bathroom and I will do it myself so it's cheap) but once it's done I might be able to sell it for £110k.

Now I've stopped over-payments so I can save up enough money for a deposit etc. to buy another one bedroom flat. It would probably take me 4 years to save enough to buy what I want. But I can't decide if it's the best thing to do. I keep changing my mind. Sometimes I think I should finish redecorating and sell as soon as I have enough money to add to what I is left for me after the sale so I can buy a new place. Sometimes I think I should just save up and buy the new place without selling this one and rent it out once I've moved. But someone just said that if I buy a second property and rent one of them the government will want me to give them a lot of money (I was told some one paid a £15k fee when they did it).

What do you guys recommend. I do want to move from this area as soon as possible. But I don't want to lose lots of money in fees and taxes etc.

diggingdude

dont become a landlord, to do it right its a lot of effort

pphillips

It probably won't be anywhere near as much as £15,000, the SDLT surplus on additional properties is 3% of the purchase price. You then have income tax to pay on any income you make on the property you rent out. You will also need to look at HMRC rules on how much of the mortgage payment is tax deductible to see if this route is financially viable.

tadaska

If was to sell it. Lets say I did get £110k for it. Minus £80k outstanding balance and minus £4k early repayment. That leaves me £26k. But what other expenses are involved? What would I get to keep realistically?

Davesnave

A 1 bed flat isn't the most flexible vehicle for investment, so hanging onto it to avoid early repayment fees and hoping for capital appreciation might not be a wise choice, especially if you are not temperamentally suited to being a landlord.

Over time it might increase in value, but these smaller properties are the first to be hit by any down turn in the market and they don't tend to attract stable, long-term tenants, who want a more permanent home. After all, you want out after just a few years.

You only need one bad tenant who stops paying or trashes the place and refuses to leave before your 'investment' becomes a liability.

warby68

If you aren't happy where you are and it would take you 4 years to save the deposit for a second place, I'd just move. 4 years is a long time to be unhappy somewhere and your numbers (equity and what you can save are not huge when it comes to the risks of being a landlord).

Concentrate on getting a home that suits you. If its a good buy it still has an investment element through your growing equity and hopefully some capital appreciation over time.

alex_163163

Do the terms of your mortgage allow you to port it?
That would mean you wouldn’t have to pay early termination fees as you would port the terms of the current mortgage to a new mortgage on a new property.

jamie_128

absolutely unbelieveable what people pay for property to stay in london, if it was me id be moving away as quick as i could its insane. Your deposit is the whole value of my 3 bed detatched house in a nice area.

getmore4less

tadaska wrote: »

I want to move to a different area as I really don't like living where I am now and I am looking to see what my options are.

At the moment I have a one bedroom flat. I bought it as a first time buyer. It was £96k and I did the 5% down payment and it was a 25 year mortgage. It's been just over 3 years since I bought it. Mortgage was fixed for 2 years and now it's a 10 year fixed as of a year ago. Outstanding balance £80k and early repayment is 5%. Monthly payments are £430 but the entire last year I have been overpaying by £400 (£830 total). The flat still needs a bit more redecorating (kitchen and bathroom and I will do it myself so it's cheap) but once it's done I might be able to sell it for £110k.

Now I've stopped over-payments so I can save up enough money for a deposit etc. to buy another one bedroom flat. It would probably take me 4 years to save enough to buy what I want. But I can't decide if it's the best thing to do. I keep changing my mind. Sometimes I think I should finish redecorating and sell as soon as I have enough money to add to what I is left for me after the sale so I can buy a new place. Sometimes I think I should just save up and buy the new place without selling this one and rent it out once I've moved. But someone just said that if I buy a second property and rent one of them the government will want me to give them a lot of money (I was told some one paid a £15k fee when they did it).

What do you guys recommend. I do want to move from this area as soon as possible. But I don't want to lose lots of money in fees and taxes etc.

What has changed in a year?

No one in there right mind does a 10y fix on place they don't like living in.

As said, porting the mortgage is likely the best option if they will let you.

Davesnave

jamie_128 wrote: »

absolutely unbelieveable what people pay for property to stay in london,

The OP doesn't say they live in London. Situations where jobs are well-paid and easier to find might be in many places.


The places where 3 bed detached houses are relatively cheap are typically deprived areas where work is scarce. That doesn't mean they are horrible places. I live in what's described as a 'deprived area' myself. It's pretty and there's low crime, but also little in the way of work opportunities.

PasturesNew

tadaska wrote: »

Now I've stopped over-payments so I can save up enough money for a deposit etc. to buy another one bedroom flat.

If the mortgage rate is larger than the savings rate you're better off doing the overpayments.

To move you don't need a pile of notes on the table, you need the money to be somewhere - and if you make overpayments it's in your equity.

So long as, once you've sold/settled the mortgage, there is then enough money on the table .... it's not important to have had it sitting on the table while you "saved".

All money is money. A pile of notes in the bank, or unseen equity through overpayments.

Create equity or a pile of cash based on the rates applicable to each pile.