Sell home and upsize or rent?

Torpillow

I have seen some similar posts but it's always a slightly different situation.

My husband and I bought our first home just over a year ago, when our mortgage agreement expires in 3 years we will need a bigger home (baby on the way).

The most obvious option is to use what we've paid into this home as a deposit on a bigger home. It is likely that this next home will be for the long term, until we retire abroad. We have a few thousand in savings to cover stamp duty/ moving costs but would definitely need to sell this house for a deposit on another one. 

My husband does not want to buy another house. 

His solution is to rent this house out on Airbnb, with that income covering our current mortgage, and then rent a bigger house for ourselves. He insists that this is the financially smart decision where we will be losing the least money.

Apparently what we are paying in interest on the mortgage is significantly more than what we would be paying in rent (?). Though there are obviously other pros and cons to consider. 

There is a lot to weigh up. What is the financially savvy decision here long term? To get a bigger mortgage or renting?

Brie

How does he know that the house can be profitably rented out on AirBNB?  Are you/he prepared to do all the change over between guests?  Well it's his idea and at least one of you will be busy with the baby......

I'm not strictly against the Airbnb idea but it's just it may not be as easy as he thinks.  I know someone that sectioned a bit of their (overly large) house to have Airbnb accommodation and that does pay her mortgage completely.  Convenient for her as she can monitor things closely and is on site to deal with change overs or any other issue.  But crucially she's located near a tourist hotspot so pretty much has a guaranteed income for 6 months of the year that pays the full year's mortgage.  Very special circumstances. 

If your & his income isn't sufficient to cover all of your own costs, including childcare, and the rent AND the mortgage then I'd try to find a different solution.    

RAS

I think people need some figures to provide the most useful information, mortgage value and APR, local rental market.

But have either of you considered

Will your mortgage provider even permit AirBnB? 

You can only set the interest on a rental mortgage against tax. 

The high cost of getting an AirBnB up to standard and keeping it up to standard even if you are not around. Plus the costs

The cost of annual relocation if you get a difficult LL or agency.

Parenthood makes a lot of demands on finances. Have you (plural) started saving for your mat leave and looked at your likely budget then and when you return to work? 

If not, I'd suggest that is your current priority.

ProDave

Buying your own home is a long term investment.  Don;t just think of mortgage cost vs rent cost.

In the longer term, you will own your own house outright with no mortgage.  That is very attractive as you head towards retirment.

If you plan to spend the rest of your lives renting, then put a LOT more into pensions, because you WILL need a bigger pension in retirement to keep on paying rent.

newsgroupmonkey_

Are you happy to move every year or two?

You could move into the perfect rental and the Landlord suddenly decides that they want to sell up and as you've only got a 6 month contract, you're going to have to find somewhere else quickly. This happens again and again and again....

I'm lucky, In 13 years of renting, this only happened once in the 4 properties we lived in. One also sold, but we'd been there 5 years and they did give us first refusal and a discount. Sadly, we weren't in a position to buy.

Few people live in family rentals because they choose to (not saying none, but few). They're difficult. You have no control and it's someone elses house. In most, you can't even decorate and even when you can, it's normally to neutral colours.

FlyMeSomewhere79

The other thing to think about is if you get someone in that turns out to be the nightmare tenant, the laws a bit of a farce when it comes to protecting landlords against tenants that start trashing houses, annoying neighbours, not paying rent etc.