Sell my house to fund a new one or rent it out?

Fionaanne141

Hello

I was hoping to get some guidance as i'm considering selling my home and moving to a new one but as a widowed woman i'm at a loss as to what would be best to do / how the mortgage would work out so i'd appreciate any guidance. I have contacted a mortgage advisor I trust, however she's away for a fortnight so keen to get my head around things if I can.

I own a property which is valued at £485-500k and i've nearly paid off the mortgage. I have 13k left on it.

I have found a new build I would like to buy which is £550k and ready at New Year. I could sell my home to fund it but im interested if anyone has experience of renting out the existing home (almost mortgage free) and getting a mortgage for the other home. Looking at the rental market in my area. My home could rent for £1500-£1650pcm

Im 33 years old, I earn 55k per year and I have one dependant who is ten. 

I'd be grateful if anyone could point me in the direction of a rough cost of letting out my existing home worth 500k and getting a mortgage for a home worth 550k. Is it purely a case of a new mortgage and I need to save a 10% deposit or would the equity in my existing home count as the deposit? Sorry........ I have no clue on these things as my husband who passed away managed our previous purchases.

Many thanks

Slithery

Do you want to start a residential lettings business? Please read the following posts and all of the links they contain to get an understanding of what's involved....

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AskAsk

i wouldn't advise becoming a landlord as it is pretty hard work and you could be paying a lot of fees so that the profit on the rent is all wittled away.  it is pretty stressful.
if you want to buy another house with the intention of renting your existing home out, then you would also be subject to 3% extra stamp duty on the new house.  you would also have to pay capital gains tax on your existing home when you subsequently sell it.
from my experience, the mortgage lender for the new house don't really take equity in your exisitng home into account for the mortgage, as they can only repossess your new house and not your current assets.

MovingForwards

Generally mortgages are only 4.5 - 5x your annual income, less credit committee eg loans / credit cards.
Therefore you will fall short on buying the new property unless you've got a substantial deposit.

Sell your existing home to buy the new one.

greatcrested

* If you keep the property you'll need savings/mortgage to buy the new property, including buying costs and 2nd property SDLT (£19,000) so say 570000.

* assume 90% mortgage of £513,000 (balance from savings) so repayment mortgage costs around £2569 per month = 30,828 pa. (at 3.5%).

* rental income = £15,000 per annum (1500 x 10 months income) gross. Then deduct 10% letting agent fee; deduct £2000 overheads/maintenance; deduct tax at 40%.

* your rental income nowhere near covers the mortgage.

(though those figures are very rough plus  I'm useless at maths so may be totally wrong!).

* Plus all the stress of being a landlady (see slithery's links...)

* conversely if you sell you'll have £470,000 equity (less £2500 SDLT less £2K selling fee = £465,500) so need savings/mortgage of just £84,500.

* 90% mortgage would cost £333 pm = £3,996 pa.

Fionaanne141

greatcrested said:

* If you keep the property you'll need savings/mortgage to buy the new property, including buying costs and 2nd property SDLT (£19,000) so say 570000.

* assume 90% mortgage of £513,000 (balance from savings) so repayment mortgage costs around £2569 per month = 30,828 pa. (at 3.5%).

* rental income = £15,000 per annum (1500 x 10 months income) gross. Then deduct 10% letting agent fee; deduct £2000 overheads/maintenance; deduct tax at 40%.

* your rental income nowhere near covers the mortgage.

(though those figures are very rough plus  I'm useless at maths so may be totally wrong!).

* Plus all the stress of being a landlady (see slithery's links...)

* conversely if you sell you'll have £470,000 equity (less £2500 SDLT less £2K selling fee = £465,500) so need savings/mortgage of just £84,500.

* 90% mortgage would cost £333 pm = £3,996 pa.

Thanks very much for your reply! I guess it’s a no brainier! I do have considerable  ‘savings’ but they are held in trust now and the tax implications of releasing those make it pretty non viable. I take an income from them instead per month which I should have said bolsters my annual income to 70k+ but still, not enough to cover a new mortgage, buying fees, letting agent fees, the hassle etc of keeping my existing home.

It was possibly a bit of a pipe dream but I was keen to explore on the off chance I could have made it work 

A mortgage of £333 pcm after selling is very comfortable so worth the short term stress of selling the home and finding somewhere more fitting for the long term