Are we stretching too much?

sangior

Hi all. We are ready to make an offer on a new flat. If accepted, our mortgage payments will be around £2600-£2800 per month. Currently, we live in our first flat, with a mortgage of approximately £2000 per month(2.7%, 13 years more to pay it off). After moving, we plan to rent out the first flat for about £2000 per month. Our total monthly income after tax is £9000.

Covering the deposit and stamp duty for the new flat will nearly deplete our bank account. This makes us a little nervous about the possibility of not being able to rent out our first flat quickly. Also I'm less worried about one of us losing our job because we're both in quite established corporate and more worried about the risk coming with renting out flat(tenants destroy flat...etc). Our income is evenly split. Are our concerns justified?

sammyjammy

How many months can the flat be empty before you can't pay the mortgage on it?  It doesn't sound to me as if renting out a property (particularly one you've previously lived in) is right for you to be honest.

[Deleted User]

Have you considered selling your first flat, putting the money into the new flat purchase thereby reducing the mortgage? I would be surprised if letting the first flat is a lucrative investment in view of tax implications: capital gains, tax on the rent received, second ghome stamp duty. Other investments are likely to be superior and would not involve becoming a landlord.

sangior

sammyjammy said:

How many months can the flat be empty before you can't pay the mortgage on it?  It doesn't sound to me as if renting out a property (particularly one you've previously lived in) is right for you to be honest.

We can manage paying for both morgages without renting one flat out I guess with our current income as we don't have children, our jobs are quite stable. We will just have much less in saving.

Sea_Shell

Have you run the numbers to see what your new mortgage would be if you just did a "normal" move, and used any equity in your current flat towards the new one, so needing to borrow less.

From the bits I've read, renting out your current flat, and remaining dependent on it's income, is not for the fainthearted, or the underprepared.  

sangior

[Deleted User] said:

Have you considered selling your first flat, putting the money into the new flat purchase thereby reducing the mortgage? I would be surprised if letting the first flat is a lucrative investment in view of tax implications: capital gains, tax on the rent received, second ghome stamp duty. Other investments are likely to be superior and would not involve becoming a landlord.

We did think about selling but considering that it will take a lot more time for us to find buyers than renters and the fact that most of our neighbours are renting, we thought it might be a good idea. 

sangior

Sea_Shell said:

Have you run the numbers to see what your new mortgage would be if you just did a "normal" move, and used any equity in your current flat towards the new one, so needing to borrow less.

From the bits I've read, renting out your current flat, and remaining dependent on it's income, is not for the fainthearted, or the underprepared.  

No, but we probably should. thanks for mentioning it. Our financial advisor advised to rent our flat instead. And the area we are living(north greenwich) has higher value for renting than selling I think as we have high rental demand from people working in Canary Wharf. 

HouseMartin567

Looks like you are in the 40% tax bracket so by the time you add in insurances, repairs etc you’ll be losing nearly half the rental income. So if the mortgage is £2k (granted you could change to interest only BTL), and you are only getting circa £1k net income, you are already significantly down. Definitely doesn’t seem worth the extra stamp duty outlay!!
 

fourmarks

[Deleted User] said:

Have you considered selling your first flat, putting the money into the new flat purchase thereby reducing the mortgage? I would be surprised if letting the first flat is a lucrative investment in view of tax implications: capital gains, tax on the rent received, second ghome stamp duty. Other investments are likely to be superior and would not involve becoming a landlord.

My God, are they taxing garden ornaments now!   Nobody mentioned that in their manifesto.

housebuyer143

sangior said:

[Deleted User] said:

Have you considered selling your first flat, putting the money into the new flat purchase thereby reducing the mortgage? I would be surprised if letting the first flat is a lucrative investment in view of tax implications: capital gains, tax on the rent received, second ghome stamp duty. Other investments are likely to be superior and would not involve becoming a landlord.

We did think about selling but considering that it will take a lot more time for us to find buyers than renters and the fact that most of our neighbours are renting, we thought it might be a good idea. 

Or you can move and sell it afterwards? You can claim back the extra stamp duty then and pay pay down your mortgage once it's sold.

AlexMac

…go with your gut..? Or

…go with your head (or a spreadsheet, risk analysis and view from us random nobodies on the interweb..?

tough call? 

I know what I did; getting on for 50 years ago. Skint mesself to buy a place. (Option a?). Lots of work. Some financial and other stress (never more than modest incomes… redundancy…ups and downs … divorce - luckily only one ,,). Sweat equity. inflation. Traded up (5 places at 8-10 year intervals). A trio of second homes. Two BTLs (never a duff or problem tenant). 

Now? Sitting pretty. Not a regret. 

GO FOR IT