Do we sell both houses?

Saving_with_the_secret

We would very much like to move to our forever home. 

We have a fixed mortgage that finishes in 2026 at 1.5% - about 115000 left to pay. We over pay - (May stop and put into high interest account after listening to Martin L podcast) 

We have another smaller house that has no mortgage and is rented out to tenants. 

We could sell the smaller house and pay off our mortgage and put the cash towards another house - but then long term we think we'd be worse off?? As we'd lose the income and increase of asset value. 

We are hoping to borrow a bigger mortgage so we can keep the smaller house, and don't have to sell it, and use the rent, and our income and the equity in both houses to buy our forever house. This by the way is a 4 bed. 

Is this doable? We aren't big financial people. We try and keep things simple. We mostly buy second hand and generally are pretty frugal. We don't have credit cards only debit cards,  and save to buy things.. keep spending down week to week etc. 

Thoughts appreciated 

silvercar

Depends on many things. Main things to consider is how much profit is there in the BTL, how much equity? Is the current great mortgage deal portable? Do you earn enough to get the mortgage you need for the new place?

Hoenir

Saving_with_the_secret said:

We have another smaller house that has no mortgage and is rented out to tenants. 

We could sell the smaller house and pay off our mortgage and put the cash towards another house - but then long term we think we'd be worse off?? As we'd lose the income and increase of asset value. 

Have you considered the potential impact of Capital Gains Tax  on the disposal? 

Is the after tax return on capital invested worthwhile?  Are you putting aside money for longer term maintenance and repairs, renewal of white goods and carpets etc?   

theoretica

So you want to remortgage the BTL, and take out a bigger residential mortgage?  How much do you need for the house you want?  How much do you earn excluding the BTL?  You might be best going over all your numbers with a mortgage broker.

BikingBud

How old are you?

When do you intend to retire?

Do you have dependents? 

Why 4 beds?  

You do realise that borrowing more money is likely to mean you are worse off rather than better of, look at the mortgage calculators to understand how much interest might cost over, 10,15, 20 years.

Retaining or increasing your debt might inhibit early retirement.

Moving into a forever house that is without a mortgage, reduces your outgoings and enables early retirement.

Brie

If it was me I would stop overpaying on the mortgage and put that money into a savings account of some sort.  Higher interest means you'll have more money when remortgage time comes along.

I would also get a credit card to put day to day spending on and pay it off each month in full.  That will give you a better look on your credit history and potentially get you a lower rate when remortgaging happens.

AND I would talk to the tenant currently renting and mention that you are thinking of selling.  Is there any chance they might want to buy the property without getting EAs involved?  That would save you a bit but if not I'd check everything was in order to issue the official notice for them to move out so you can sell.  More likely to have a buy without a sitting tenant.  And then put the house up for sale.  That whole process may take you up to 2026 in any case so get that started and you can get rid of the mortgage, the aggravation of tenants and start looking at moving and sorting out retirement plans.