Selling to rent, a bad move?

eamyers

Yes Stevenage is much more affordable and we’d be looking there when we can buy but we’d still need in the region of 30k if we don’t make any money from our flat. 

eamyers

So Angela you wouldn’t suggest over paying? 

numbercruncher8

TBH there are heavy intangible costs involved either way that it is difficult to make judgement on.

I presume the property might be a modern two-bed flat which is not particularly spacious for a couple with two kids and that situation only gets worse as the kids get older. So there is a cost of inconvenience living there to avoid crystallising a loss.

Moving away gets you a much more suitable place, but then also introduces a new commute to work which is time that could be otherwise spent with family.

Don't think there is enough information to call it either way, but do look more closely at the property. Valuations are not often sold prices - the flat could achieve over or under that. Look at the competition available, you may be in a sweet spot, or up against a lot of others.

Another aspect to consider is whether you have the funds for a contingency or family support. For instance, looking for a rental place only when the sale is exchanged is probably too late and may make you homeless, it would be much better to have the cushion of family. But the worst case scenario is that the sale falls through close to exchange which means you have to pay 2 sets of housing costs for months while the transaction starts again.

eamyers

Thanks Numbercruncher unfortunately we have to sell our flat for what the rics surveyor values it at, no more or less which is another huge downside of s/o. 

It’s a small flat yes, we can make it work but then the thought of a garden and 3 bedrooms and the ability to save 300 a month seems like a great idea on face value, but totally appreciate timings and this is one of my concerns. Also, unfortunately we don’t have any family that could house us. 

Seems like whatever we do we’re stuck! I know we’re lucky to be on the property ladder but I don’t feel too hopeful about ever getting out of here!

eamyers

And yes, lots are trying to sell in our block. We may just be unlucky as we own 75% and therefore the potential buyer will need a bigger deposit

AdrianC

eamyers said:

Yes Stevenage is much more affordable and we’d be looking there when we can buy but we’d still need in the region of 30k if we don’t make any money from our flat. 

Or rent in Stevenage, while you save your equity.

Does your OH commute into London? Would he be better off working locally? Yes, lower income, but far lower travel costs and better quality of life through not spending three hours a day on trains...

eamyers

Thanks Adrian, my husband is a scaffolder his yard is a mile down the road from us but he has all of his qualifications so he could easily move. 

MFWannabe

On the face of it you have very little options 
You state there’s quite a few flats up for sale in your block which will make it harder to sell. 

Also moving further out your husband will incur travel costs which would mean you’ll be no better off. 

I’d wait it out for a while, couple of years possibly? See what happens with house prices and mortgages, hopefully 90% mortgages may be more available again 
Are you able to save any money in that time towards a deposit? 

I disagree with the other poster ref overpaying mortgage; it’s always worth overpaying even by a small amount, crunch the numbers in overpayment calculator and see if it’s worth it 

FaceHead

When looking at the choice of moving from mortgage to renting, renting is always going to look more attractive, as the mortgage payment includes payment of the mortgage principal.

Let's say your mortgage payment is currently 1100 pcm, and you see that you have the option of of moving to rented at 800 pcm. Yes you have an extra 300 in the bank, but roughly half of the mortgage payment is interest, and the other half earns you equity in the property. So in the mortgage option you have 300 less in the bank, but have earned 500 of equity. 

Clearly your property has gone down in price - normal for a new build initially - so you're not seeing the principal paid off turning into equity, but if property prices were broadly flat that should change as the new build gets over its initial value slump.

The cost of a repayment mortgage and rental cost aren't directly comparable as you get something quite different from each. 

Angela_D_3

In your shoes i stay,  save as much as you can and the moment the valuation hits that magic £17,000 number move. I say save rather than over pay so you've got the money to hand.  Flats are getting hammered at the moment.  A 2nd baby isng going to change the amount of space you need rather than want.