Should we sell mortgage-free house, or let it out?

rundmc-k

Hello folks.

Our position is that we are hoping to move to our new house in the next couple of months. We are mortgage free on our current house and are planning to complete purchase before selling.

Our aim was to take on large initial mortgage (actually a family loan that will be paid back with 4.5%ish interest), then sell the old home, pay back a lot of the loan, and reclaim the stamp duty, hopefully leaving us with a much smaller mortgage and some money to do necessary work in the new house.

My query is this... are we foolish not to consider letting out our old home?

I haven't really contemplated it much for the following reasons: hassle or being a landlord/simplicity of sale, 2nd home stamp duty unreclaimable if don't sell within 3 years, potential capital gains tax, having to pay interest on a large mortgage (family loan) instead of small one, and also a vague "understanding" that letting is much less palatable to landlords these days.

But have I got it wrong... should I be considering letting despite the reasons above?

Any help would be much appreciated before we 100% commit to the sell. Many thanks

BarelySentientAI

Do you want to be a landlord?

rundmc-k

BarelySentientAI said:

Do you want to be a landlord?

I wouldn't say I want to be, but I don't want to completely reject the idea without considering whether it could be overall beneficial

Hoenir

Has your family factored in that the interest they'll receive is taxable? 

rundmc-k

Hoenir said:

Has your family factored in that the interest they'll receive is taxable? 

Yes, they're aware of that. The plan would be, if we were to sell, to pay them back the proceeds of the house sale and then take out a mortgage with the bank and fully repay the family loan. There is potential for this plan to be adjusted if we were to keep and let the house, but this option hasn't really been explored as yet

Bookworm105

over the years there are hundreds of post evaluating exactly your question on here, try the search function rather than asking for a regurgitation of pros and cons

rundmc-k

Bookworm105 said:

over the years there are hundreds of post evaluating exactly your question on here, try the search function rather than asking for a regurgitation of pros and cons

Thanks. I did do that, and always do before posting a new thread. I also did research outside of MSE. However I still felt that having some current opinions especially based on the ever changing world of house letting would be helpful, and a lot of MSE forumites are very helpful in giving advice even if it's a "common" topic.

Instead of clicking on the topic, reading it, and then just telling me to dyor, you could just not respond and save yourself some time. I wouldn't have minded.

Jemma01

How long are you planning to keep the property vacant? There seems to be the expectation that those who lent you the money expect the majority back soon after on the basis you're selling, just without creating a chain for your purchase. Has a date been agreed for when the sale will happen?

If you'd leave the property vacant for two years, of course I'd rent it. But 6 months? Not at all.

Hoenir

rundmc-k said:

BarelySentientAI said:

Do you want to be a landlord?

I wouldn't say I want to be, but I don't want to completely reject the idea without considering whether it could be overall beneficial

The offset of being financially beneficial is that you might have the misfortune of meeting the tenant from hell (for example). Reward comes with taking risk. Some people are comfortable and others are not. Only you can decide whether it's worthwhile. 

rundmc-k

Jemma01 said:

How long are you planning to keep the property vacant? There seems to be the expectation that those who lent you the money expect the majority back soon after on the basis you're selling, just without creating a chain for your purchase. Has a date been agreed for when the sale will happen?

If you'd leave the property vacant for two years, of course I'd rent it. But 6 months? Not at all.

If we decided to sell, we'd probably try to get it on the market within the next 4-6 weeks, so that it was vacant for the least amount of time possible. 

There is an expectation to give the lent money back. It would be a case of, after the purchase, either taking out a larger bank mortgage (if not selling) or a smaller one (if selling) to settle the loan.

rundmc-k

Hoenir said:

rundmc-k said:

BarelySentientAI said:

Do you want to be a landlord?

I wouldn't say I want to be, but I don't want to completely reject the idea without considering whether it could be overall beneficial

The offset of being financially beneficial is that you might have the misfortune of meeting the tenant from hell (for example). Reward comes with taking risk. Some people are comfortable and others are not. Only you can decide whether it's worthwhile. 

Yes there are definitely risks in taking on a tenant. I suppose I was wondering more if there are any newer or likely future disincentives for landlords related to the likes of taxes etc?