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    • c00kie
    • By c00kie 20th Mar 17, 10:27 AM
    • 2Posts
    • 0Thanks
    Renting out main home and buying new property
    • #1
    • 20th Mar 17, 10:27 AM
    Renting out main home and buying new property 20th Mar 17 at 10:27 AM
    Hi all,

    Iím looking for some advice about my current situation

    I currently own a 2 bedroom flat in London, recently valued around £450k and I have £150k left on the mortgage. Rental income for a similar property in this building is around £1500. I am looking to buy a property with my boyfriend, we have a DIP for £600k but are looking at houses around £350k.

    I am considering my options, and one of them is to rent out my current property rather than selling it, and we buy a home to live in together, which would be my second property (he doesnít own any other property). If possible I would look to take out around £50k equity from my current property to finance deposit for our new home, so I would still have around £250k equity in my current property.

    The current service charge on my property is £3000 per year. What things to I need to consider when looking at whether this would even be possible and financially viable, and where is a good place to calculate the costs incurred such as tax, insurance, additional stamp duty costs, rental fees etc?

    Thank you for your help
Page 1
    • Placitasgirl
    • By Placitasgirl 20th Mar 17, 10:34 AM
    • 258 Posts
    • 439 Thanks
    • #2
    • 20th Mar 17, 10:34 AM
    • #2
    • 20th Mar 17, 10:34 AM
    Before considering anything else you'd need to establish whether your current mortgage provider would permit you to let your current home. That's not a given unfortunately, and you cannot let without their approval, so before you invest time and energy looking any further down the line, I would begin by making preliminary enquiries with them.
    • Pixie5740
    • By Pixie5740 20th Mar 17, 10:45 AM
    • 12,111 Posts
    • 17,045 Thanks
    • #3
    • 20th Mar 17, 10:45 AM
    • #3
    • 20th Mar 17, 10:45 AM
    If you are looking to take equity out of your current home then you would require a Let-to-Buy mortgage. Maximum LTV is usually 75% so you should be ok with lenders looking for rent to be 125% of mortgage payments or even 145% for some lenders. You will need to check your lease to see if sub-letting is permitted.

    Plenty of SDLT calculators are available online.

    If you're a higher or additional rate income tax payer you will need to consider the changes to mortgage interest relief.

    For insurance try getting a few quotes. As for letting fees they can be as much or as little as you like. If you self-manage you could be talking a couple of hundred to find and reference new tenants whereas a full managed service using a letting agency could be 10% of the rent plus tenant finder fees plus whatever other fees the agency think they can get out of you.

    Your gross rental yield is only 4% so you might find that your net rental yield means the property won't even be wiping its own face as a rental property meaning to make any money you'll be banking solely on capital appreciation.

    You might find G_M's Guide to Tenancies in England/Wales useful. It contains information for new landlords, deposits, selecting/sacking letting agencies, repairing obligations and rent increases.
    • poppy10
    • By poppy10 20th Mar 17, 7:12 PM
    • 5,939 Posts
    • 7,184 Thanks
    • #4
    • 20th Mar 17, 7:12 PM
    • #4
    • 20th Mar 17, 7:12 PM
    If you are keeping your existing home then you will be charged the second home stamp duty rate. For a £350,000 property, this will mean you will be charged £18,000 stamp duty rather than the £7,500 you would be charged if it was your sole property.
    Signature changed by MSE ForumTeam
    • MonkeyDr
    • By MonkeyDr 21st Mar 17, 9:16 AM
    • 142 Posts
    • 169 Thanks
    • #5
    • 21st Mar 17, 9:16 AM
    • #5
    • 21st Mar 17, 9:16 AM
    I was in a very similar situation a few years ago, albeit without the extra SDLT which has now been introduced.

    Do you know what the rental market is like where your flat is? I knew mine had excellent rental potential for young professionals - very close to tube in increasingly trendy-ish area, big bedrooms so good for sharers, I had found lodgers very easily etc.

    And what is the market like? Of course you can never predict these things, but my flat is in an area generally on the up, mainly due to tube proximity and the nature of the housing stock.

    How attached are you to your flat? Will you be upset if fittings get damaged? I remember from my own renting days that you simply don't look after things as well as you do when you actually own them. My well-loved and cared for wooden kitchen work surface has been ruined, sadly. (And I have put it down to wear and tear over time and not tried to claim from anyone's deposit - when I replace it I will get something more hardwearing.)

    Can you be bothered to make sure you follow all regulations etc? Being a landlord is not a passive thing, even if you use an agent.

    And you really do need to crunch the numbers and take into account tax changes etc. Will you do your own tax return? I don't find mine too arduous, but I am fairly meticulous with records and stuff

    Although we have had nice tenants and no voids it has not been entirely problem-free. I use an agent as I cannot drop everything to deal with emergencies, but they are really _really_ useless and overpriced at the maintenance things, so anything non-urgent I sort out a tradesperson myself.

    And, ultimately, I haven't really made any profit beyond the asset itself appreciating. Or, rather, I have made a small amount of profit each year but am saving it all for a refurbishment.

    We toyed with keeping my partner's flat too and I very pleased that we didn't. It feels great to have this asset there, but I am not sure I would do it again, and I certainly have no plans to buy another.
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