Options on moving home / second mortgage

marysmarket

Looking for some advice on moving house. I'm currently in a 2 bed flat which has a 900 year lease. Fairly happy in the property but it has some disadvantages and I would like to move house and ideally to buy a house for more space with the comfort of no joint liabilities, upstairs neighbours, freehold  etc.

My mortgage is small (£100k, 11 years) on 2% fixed until mid 2027. Property would sell approx. £550-580k. I have a further over £100k in savings.

I'm now planning to look to move house and selling up. The equity with additional savings will enable me to buy a house in the same area as I'm not looking to upheave kids and job and so on.

It's a good problem to have but this is where I am at a cross roads on what to do. I have a few options (I know good position to be in):

1. Sell my current property and use equity and savings to fund a move to a larger property. This is the most straightforward option but means buying and selling simultaneously. 

2. Stay in current property and pay off the mortgage (I could essentially pay this off in the next few years, overpaying with savings). This keeps me in this leasehold flat though with no opportunity to extend etc and I have to put up with upstairs neighbours. 

3. Keep my current property, convert this to a BTL and remortgage to buy another property to live in. I have run the numbers with a broker and it is possible. This would mean taking on landlord responsibility (I have experience of this), tax implications (higher earner) and increased risk of two large mortgages. The benefit of this would be a massive boost to my retirement plan.

I'm mid 40s with DC, single parent. 

At the moment I'm undecided about what to do... what would others suggest? Are there any other options I haven't thought of?

TIA 

grumpy_codger

(3) - and much higher SDLT as well?

marysmarket

grumpy_codger said:

(3) - and much higher SDLT as well?

Yes the additional SDLT is significant. 

marysmarket

Bumping thread in the hope for some views on my options...

Albermarle

This is the most straightforward option but means buying and selling simultaneously. 

That is how most residential property sales go ahead. Sometimes can be problematic but once it is all done, then you do not have to think about it anymore, unlike the ongoing issues of being a landlord.

bolwin1

Have you double checked the numbers on the BTL option ? What was advantageous 10 years ago, might not be now. Lots of landlords selling up for this reason. Have you accounted for dodgy tenants, vacant periods, repairs etc. etc. ? 

poseidon1

marysmarket said:

Bumping thread in the hope for some views on my options...

There is very good reason why a vast number of BTL landlords are selling up ( especially 'accidental' landlords ).  Apart from the tax regime becoming intolerable for those in the 40% tax bracket, the raft of additional tenant protection measures being introduced and steady erosion of landlord's rights has made this area of investment better suited for those using corporate structures with a view to expanding their portfolio as an ongoing business concern.

You don't appear to have an especially considered reason for pursuing the landlord option, and as mentioned earlier you will find the additional 5% 2nd property SDLT liability on your next property purchase particularly unpalatable - it eats into your equity from outset!.

Sapindus

Makes no sense paying off the mortgage early when your savings are earning more in interest than the mortgage is costing you in interest.  And then you will still want to move, presumably.  Not sure what the point of this option is.

On the other hand, at least moving in the same area reduces some of the hassle of buying and selling simultaneously.  As others have said this is normal way of doing things, the only real alternative is to temporarily move into rented which isn't necessarily plain sailing either.
 

marysmarket

Thanks for the replies. 

Very much veering away from the let to buy option now as time and energy is low to deal with the business of being a landlord again with all the pitfalls mentioned.

Still leaves me with the choice to stay put or make the move now to a larger home without the pitfalls of being in a leasehold property. The former allows me to pay off the mortgage and live mortgage free in the very near term but moving to a larger freehold house with a slightly bigger mortgage seems like a wiser move whilst I am still relatively young and working. Thoughts?

marysmarket

To add I guess moving to a larger home now provides the opportunity to cash it in and downsize in the future too. 

Albermarle

marysmarket said:

To add I guess moving to a larger home now provides the opportunity to cash it in and downsize in the future too. 

I would not use this as a reason for or against.
Downsizing is not as easy as it sounds and/or does not always produce the expected funds.

From a purely financial point of view you  could just as well stay where you are, and when you are mortgage free pour the extra funds into your pension/investments.