Selling to rent - good idea or not?

CliffordSquirrel

My husband and I both work in the aviation industry. I have been on furlough since March and my husband has had to take a salary drop.
We were intending to buy a bigger house but at the present time we would not be able to obtain a bigger mortgage. In the meantime we are selling our house and intend to rent until hopefully house prices fall next year. Do yo think this is a wise decision?

. 

goliaph

Imho it's very good decision.

El_Torro

Why the rush to sell? Do you already have a buyer lined up? I don’t know your situation but would it be better to cancel your sale, stay where you are, and buy a new place when your jobs are more secure? 

We don’t know how much longer the aviation industry will suffer, or how many people working in the industry will still have their jobs by the end of this. Selling your house and moving to rented accommodation just seems to be giving you a big rental liability, something you don’t need in these uncertain times.

Atomix

You will always get differing opinions. Here is mine... realistic scenario.
you sell your home - and get zero interest on the money.... pennies probably because as we all know interest rates are dire atm. And it costs you to sell too, and move, but that isnt my point -
you rent another house. For arguements sake lets say the rent is £1k a month, and the mortgage was £1k a month. You rent the home for 12months, hoping for house prices to drop. In that x12 months you will be £24k behind on your mortgage, because you havent paid the mortgage and your x12 months rent could have gone towards the mortgage. (So to get back to where you should be with your mortgage is £12k and your spending £12k on rent - so to be back where you were, would cost you £24k)  Also
you are x12months behind in time - so add that year onto the term as well.
Imagine how you would feel if x6months into your rental year, house prices went up... or, they didnt fall so you rent for another year, therefore £48k down. And more importantly x2 more years paying your mortgage JUST to get back to where you should have been...
In the meantime mortgage rules change, interest rates go up, and you are unable to get the mortgage that you had originally! - obviously no one can predict the future, but the scenario above could easily happen -

HampshireH

CliffordSquirrel said:

My husband and I both work in the aviation industry. I have been on furlough since March and my husband has had to take a salary drop.
We were intending to buy a bigger house but at the present time we would not be able to obtain a bigger mortgage. In the meantime we are selling our house and intend to rent until hopefully house prices fall next year. Do yo think this is a wise decision?

. 

Entirely up to you.

What makes you think house prices will go down ? What if they go up and you have paid out a years rent instead of buying.

What if mortgage rates increase and you could have secured a better rate now?

What if you cant secure a bigger mortgage later down the line?

That said renting gives you more freedom to buy anywhere anytime. 

It really does depend on how you all feel about it. Renting means you could be moving every 6 months or could stay for years!

Personally if I could afford my current mortgage and bills I would stay.

newsgroupmonkey_

Atomix said:

You will always get differing opinions. Here is mine... realistic scenario.
you sell your home - and get zero interest on the money.... pennies probably because as we all know interest rates are dire atm. And it costs you to sell too, and move, but that isnt my point -
you rent another house. For arguements sake lets say the rent is £1k a month, and the mortgage was £1k a month. You rent the home for 12months, hoping for house prices to drop. In that x12 months you will be £24k behind on your mortgage, because you havent paid the mortgage and your x12 months rent could have gone towards the mortgage. (So to get back to where you should be with your mortgage is £12k and your spending £12k on rent - so to be back where you were, would cost you £24k)  Also
you are x12months behind in time - so add that year onto the term as well.
Imagine how you would feel if x6months into your rental year, house prices went up... or, they didnt fall so you rent for another year, therefore £48k down. And more importantly x2 more years paying your mortgage JUST to get back to where you should have been...
In the meantime mortgage rules change, interest rates go up, and you are unable to get the mortgage that you had originally! - obviously no one can predict the future, but the scenario above could easily happen -

You're not £24k behind the mortgage, though, only £12k. You can't double bubble. Effectively, you've paid someone else's mortgage for 12 months.
And because of the way that interest works.....

Let's assume you're 15 years into a 30 year mortgage. x% of your payments go towards the interest. y% goes off paying the capital.
You exit the mortgage with 50% of the original borrowing now in your pocket. You still have 15 years worth of mortgage left, whether you hold off this year or next year or the year after. The rent you are paying is completely irrelevant.

And arguably, if you have 50%+ deposit on a15 year mortgage, chances are, you're going to get a much more favourable interest rate than you were originally on, which could even negate the 12 months that you weren't paying it.

And if Nostradamus Crashy's predictions come true, then the house prices will have dropped so much that you'll actually be able to make a killing on the market.

SpiderLegs

CliffordSquirrel said:

My husband and I both work in the aviation industry. I have been on furlough since March and my husband has had to take a salary drop.
We were intending to buy a bigger house but at the present time we would not be able to obtain a bigger mortgage. In the meantime we are selling our house and intend to rent until hopefully house prices fall next year. Do yo think this is a wise decision?

. 

Sounds like a very high risk strategy to me. One that doesn’t seem necessary, other than you wanting a bigger house. It could leave you long term significantly worse off.

You are hoping for a further downturn in the economy which will significantly reduce house prices.
it has to be significant in order to cover the extra costs associated with sell & rent, plus bringing this larger house into your budget.

But then you are also hoping that this downturn does not impact your current financial state, which seems a bit unlikely given that you are furloughed and your partner has reduced income.

so -
what percentage price drop are you hoping for?
what’s the chance of that happening?
what’s the chance of your household income staying the same/improving while this happens?

steampowered

While it is likely that there will be a modest drop in house prices next year, I don't think "timing the market" in the way you are intending is very wise.

Most rentals are for a minimum of 1 year. Plus you have all of the hassle and cost of an additional set of moving costs, changing bills and utilities. It hardly seems worth it.

Plus, as you are only selling your house now, it is unlikely that your purchase will complete before the stamp duty holiday is due to end next March. So your sale might be hit by the drop in house prices.

Upsizers like you will benefit from a fall in house prices anyway, even if you don't move, because the price of the house you want to buy will drop more than the value of the house you are currently in. You don't need to move house now to benefit from that.

MFWannabe

CliffordSquirrel said:

My husband and I both work in the aviation industry. I have been on furlough since March and my husband has had to take a salary drop.
We were intending to buy a bigger house but at the present time we would not be able to obtain a bigger mortgage. In the meantime we are selling our house and intend to rent until hopefully house prices fall next year. Do yo think this is a wise decision?

. 

It’s  your decision, personally I’d stay where I am. Especially as you were only moving to buy a bigger house 
Why pay someone elses mortgage for 6 months / a year when you could pay more off you’re own? 

MEM62

CliffordSquirrel said:

In the meantime we are selling our house and intend to rent until hopefully house prices fall next year.

What makes you think that prices will drop next near?  In particular, what makes you think that they will drop by enough to cover the costs you will incur in rent, legal fees for buying and selling and stamp duty? 

CliffordSquirrel said:

Do yo think this is a wise decision?. 

Nope. Not in any way, shape of form.  

RelievedSheff

I am only going to echo what others have said above. Moving into rented in the hope that house prices will drop is a risky business when you could just stay where you are, pay your mortgage for another year and assess the market again at that time.

Nobody knows what is going to happen next year. After all who could have guessed how much house prices would rise this year given all that the economy has had thrown at it?