Pitfalls of breaking the chain and renting?

got2dothisnow

My house sale is very close to exchange now and the property we're buying looks like it's about to fall through. We don't want to wait any longer to sell as we're worried we could end up with another collapsed sale so we have two options - find a stop-gap no-chain house to buy (there's nothing else available at the moment that meets our requirements) or rent. I've found several rentals which are all available now for a minimum 6 month term. My plan would be to rent for the 6 months, with a view to finding a property later on as a chain-free buyer  and ideally moving out before the 6 month term is up (obviously we'd be liable for the whole 6 months rent - we are happy to accept this loss). 
Are there any pitfalls in doing this? We don't have any early repayment charges on the mortgage, so that's not a problem, but we do have life policies and critical illness policies which we took out at the time of the first house purchase on a decreasing term - would this still be valid even though we won't own a property anymore?
Would we risk our chances of getting a new mortgage once we no longer have one? We're looking at 50% LTV so no problems finding one currently, but would our credit ratings change at all (we have no other borrowing)?
Are there other things which we haven't considered? I've already factored in additional moving costs and the hassle, but unsure if there are other things I've overlooked. 
Apologies if these are really silly questions! All help appreciated

hazyjo

Wouldn't even contemplate a 'stop gap house'. Certainly not in this market! I'd go with a 6 month rental if you don't want to lose your buyers. You'd be liable for more than just rent - probably council tax too and any other associated costs, bills (there will still be electric being used), and possibly insurance issues as they may not cover an unoccupied house. Chances are you're looking at a min of 4 months anyway. Say a month to find somewhere, 3 months for the purchase to go through, should only be a couple of months. And if it takes you 3 months to find somewhere, you'll be fine.

got2dothisnow

Thanks for that. I've looked into the bills and definitely wouldn't be liable for any of those once I'd moved out - it's only the rent which I'd have the 6 month commitment on and certainly not council tax as that only applies to the property I'm currently living in. Insurance is also not a worry as that's the owner's issue - as a tenant, I'd only need contents insurance for my own belongings for the time I'd be there. But it's more the effect on my life cover and any other mortgage issues which I'm concerned about, rather than the month-to-month outgoings. I'm just wondering whether I've missed anything less obvious which would put me at a disadvantage by temporarily not being a home owner?
For example, my partner's worry is that if I died, he wouldn't be able to get a mortgage for the new house, although he would have the life cover payout and my in-service death payment which would mean a significantly smaller mortgage (assuming the life cover would still be valid). I hadn't really thought about this until he mentioned it and it made me wonder what other people have discovered when doing this themselves.

Crashy_Time

Why wouldn`t you be paying council tax on the rental?

MovingForwards

You are liable for council tax for the duration of your tenancy.

Your insurance is a fixed term policy, makes no odds of you are in a rental or own a home. If you are up-sizing, then review the amount you need. As you say, if you die, he gets paid out and only has to find a smaller mortgage.

We don't have credit ratings in the UK, the lenders have their own way of assessing if they want to lend you money or not.

You are over thinking everything.

got2dothisnow

Thanks for the replies....everyone seems hung up on the council tax issue...Just to clarify, I've already enquired about one of the rentals and the council tax only applies while I'm living there. But as I said before, the monthly costs are not a concern anyway - even if we had to pay that, we're only talking £180 per month... it's the effect it could have on us as non-owners that I'm interested in. I am over-thinking it, yes. That's because it's a big deal to give up a home I own for the first time in twenty-seven years and be stepping into the unknown. I haven't rented since uni!
I'd love to hear from people who have done this themselves and hear how it went...

shinytop

I'm doing it now.  We planned it this way; our sale completed January this year and we're in a 6 month rental now.  We've now found somewhere to buy that we should hopefully move into about 4 months into the rental contract.  Financially, monthly costs are about neutral because the rent is covered by interest earned on the sale money along with savings because of the much cheaper council tax in the rental.  I hadn't rented for many years either.  I can't think of any downsides apart from the extra move and a couple of months rent if we have an overlap.  Main upsides are (1) being (almost) forced to de-clutter because the rental house is a lot smaller than our previous abode (2) getting the new purchase cheaper because we were not in a chain and can move quickly.  Of course that can't be proved but I'm convinced   and (3) we will have both houses at the same time so can move in gradually/redecorate the new one, etc.  

Your big upside is you don't lose your sale, which is more significant that all of mine. 

got2dothisnow

Thanks shinytop. That sounds so positive and I'm pleased it's working out well for you. I hadn't even considered the interest on the sale money - it will be strange to suddenly have all that money in the bank!!

Slithery

got2dothisnow said:

Just to clarify, I've already enquired about one of the rentals and the council tax only applies while I'm living there.

Who told you that? It's not what the legislation says...

pinkteapot

Your life assurance isn’t connected to your mortgage. You can sell your house, pay off the mortgage, and keep the life assurance. Just keep paying the premiums!

People always think their ‘mortgage life insurance’ is part of their mortgage. It’s not. It’s a separate insurance policy that you often take out at the same time as your mortgage, to cover the amount of the mortgage. 

We sold and rented, then bought, during 2018-19. We kept our life assurance and still have it now. Since taking the policy out in 2014 we’ve both been diagnosed with medical conditions which would make a life assurance policy taken today more expensive (or they’d just refuse to cover us). Our new mortgage is smaller than the old one so the old policy more than covers it. 

Don’t assume you’ll be out of the rental before six months is up. We ended up in our rental for a year because it took a while to find the right house, then it took a while to buy it! 

pinkteapot

p.s. Won’t affect your chances of getting a mortgage either. You don’t have to have a mortgage to get a mortgage! 

Credit rating won’t be affected either. Just make sure you go on the electoral roll at the rental address, and change your address with banks, phone companies etc etc, even though it’s only a short term house.