Sell house or rent it out.. WWYD?

[ginzillas]

There are lots of ifs and buts to our situation but I'm curious as to what other people would do.

We bought our first house a year ago in Hertfordshire. We only got our mortgage (for £160,000) by the skin of our teeth as I'm self employed and hadn't earned a huge amount since having DD. It's on a two year fixed deal.

We like it here but have since decided that we're better off up north in Yorkshire near family.

DH is looking for work and we've been offered the chance to live in a relative's empty flat on minimal rent. It would be perfect while we look for somewhere permanent to buy. We are very grateful for this. It's the perfect opportunity.

But should we sell our Herts property and stick the proceeds in savings so that we aren't in a chain when we buy again? Prices have shot up so we will have made a good profit. Or should we rent it out for six months to a year until our two year fixed deal is over and we won't be fined for breaking the deal?

DH doesn't want to be a landlord and I see his point but I'm nervous of selling our place and then finding that we are unable to get a mortgage second time around.

Any advice? Thank you.

[Shirleycantbe]

I think it depends how much you can rent it for. You need to take into account the agency fees and expenses involved in renting and the fact that the rental income will be taxable.

If it is still financially viable I would rent it, avoid penalties and hope the property continues to rise in value over the next year. NB I think it would be hard to rent it just for 6 months.

[ginzillas]

I should say that all our savings are in the house so we couldn't even think of buying another place without selling this one.

[ginzillas]

Thanks. Yes, DH made the point about being unable to rent it for just six months. To complicate matters, we have just over a year before we start applying for DD's primary school place. Our relative's flat is close to a good school so we'd be ok but if we then can't buy in that exact area it'll be a bit of a mess.

[specialsubject]

while the minimum AST is six months, it will be a lot of work and expense for that, and there is always the risk of a wrong'un. You can insure against this but if you do get one of the tiny minority of rogue tenants they won't be out in six months.

also there are upcoming penalties and problems for 'accidental landlords'.

sell it. You'll struggle to get much interest on the money but if it isn't for too long, it is fine. Do remember to split it between banking licences as I imagine you are talking about more than £85k each.

[TooMuchCantBreath]

Getting a mortgage has got much harder. It'll be easier if you have a really good deposit of course but maybe see a mortgage adviser before you make a decision. It may be easier to get a mortgage if you already have one iyswim rather than starting from scratch.

[ginzillas]

That's the thing that I'm worrying about. We were turned down by a succession of lenders before we got our deal last summer. It was a nailbiting time. Part of me wonders why we are considering doing it all over again! I think that our mortgage adviser is going to say the same thing when I email him tomorrow....

[Gemma77]

For me it would depend on how long I expected to stay in the relatives flat (which is very nice of them!)

If it was a very short term thing I would sell as there is all the hassle associated with being a landlord and if you are buying soon you will not loss much equity in your current house.... Also puts you in a fab position for being a very attractive buyer.

However, if the market up north is such that you think it will take more than 6 month to find a new property then I would be tempted to rent for 6-12 months so your house doesn't lose any value when you do come to sell.

Good luck!

[ginzillas]

It would be for a year maximum but we'd ideally like to get a family home asap. And yes, we're so, so lucky. We're pinching ourselves that we have been given this opportunity!

[TooMuchCantBreath]

One attraction of renting would be that you can save the difference between your mortgage payment and your rent towards your deposit or moving costs. You'd also get the advantage of any further price rises.

[ginzillas]

Well, actually, the rent each month would only just cover the mortgage so we'd really only be doing it to keep the property a bit longer and carry on paying off a mortgage.

[TooMuchCantBreath]

I meant your tenants will cover your mortgage payment with their rent so you'll have the money you'd normally spend on the mortgage. Once you've paid the rent on your flat you can save anything left over.

[ginzillas]

Sorry, I see what you mean! Yes, it would be brilliant to be able to save up a bit more on bumping up a new deposit. Big decisions...

[iPaddy]

Unless you really want to be landlords, sell. It's much more time consuming and riskier than most people image.

[iPaddy]

Will your lender even let you rent it out?

[VivaLeBeaver]

You probably wouldn't be allowed to rent it. You'd have to move to a BTL mortgage so you'd break terms of the 2 year mortgage and pay a redemption fee. BTL mortgage is likely to be higher interest.

You'd pay 20% income tax on the rental (apart from the interest part of the mortgage repayment). Landlord insurance, building insurance, 10% agency fees, repair costs, tenant finder fee, risk of it not renting......

Depends how the figures work out and what your attitude to a bit of a gamble is? Also do you think that property prices have peaked? I've heard they have so is it a good time to sell? But then if prices continue to rise you'd be better off hanging onto it.

[ginzillas]

This is the question I've just emailed our mortgage advisor - whether we can actually rent it out or not. I'm more or less certain that we can't. Interesting point about prices having peaked. They've gone mental here. Houses like ours are being put on the market for £55k more than we paid for ours a year ago - and they're selling immediately. Surely they can't keep going up like that? This is partly why we want to leave the south east. We'll never be able to afford a three bedroom house on our wages and we don't have any family down here so we're paying a lot in childcare too.

[roneik]

Take the 55 k and run with it to Yorkshire. Have you not been keeping up with property trends. Most of the UK fell last month , Take it or chase the market down, because inevitably that's where it's going, it wont end happily for millions.Forget what Kirsty and the state media will have you think the boom it's over .
Soon every man and his trougher landlord will agree, alas it will be too late as everyone will be looking to see where the exit went

[hereandtherex]

If you were turned down by most lenders a year ago then you will be turned down by all this year. MMR. Sorry.

[BreezefromtheWest]

Are houses cheaper where you are moving to OP? In which case, I would definitely sell your house in Herts rather than rent it out as you may get decent tenants, but then again you may not. I was in a similar situation and rented my old house out but despite interviewing tenants, I got a couple who were not all they seemed. They trashed the place and caused more damage than their deposit, plus they never paid the last few months' rent. I then had to put it right, re-paint it and I spent thousands before putting it on the market. Also, as others have said, there are so many incidental expenses.

Also, I have read from lots of sources that the market has definitely stalled, it might even drop further, so perhaps it would be a good time to sell.

Your rent free flat will pay for the shortfall you might have to pay to surrender your mortgage so you shouldn't be too much out of pocket. Plus you won't be in a chain when you find the perfect family house in Yorkshire.

[roneik]

Breezefromthewest , thats some sound advice there IMO

[DontDrinkAndFacebook]

I would strongly recommend that you rent it out. The rental income in Herts will be good. If you give up your foothold on the greater London property ladder you may never be able to get it back on again, should you need to.

I would keep the house for a few years - certainly while prices are still rising. Wait until you are well settled in Yorks, make sure it's likely to be a permanent thing, and then, in a couple of years or so, if the prices start to plateau a bit, that would be the time to sell. now you have that mortgage, given how difficult is was to obtain, I would not give it up. Especially if your work has dried up a bit since then.

Even if your mortgage rate goes up you might still do very well per month out of renting a cheaper house in Yorkshire and renting yours in Herts out. All the while it's cash positive why would you not?

And it means you have the flexibility to rent in whichever school catchment you need in Yorks. (don't know if you have DCs but it might be an issue eventually.)

[bakingaddict]

Agree with Don'tDrink. If it's possible i'd rent your house out for 12 months while you settle back up there and not make any snap decisions to sell up just in case the Yorkshire move doesn't quite go as planned. That way you have the option to return if work falls through or something

[ginzillas]

Hello again. Thanks for the advice. Yes, the area we're planning on relocating to us cheaper. We should be able to afford a three bed rather than a two bed. I feel reluctant to sell and let go of the mortgage. We spent so long renting, it would feel a bit like a step backwards rather than forwards.

[DontDrinkAndFacebook]

Well it's only a a step backwards if you sell in order to rent. If you still own a house then it makes no difference whether you live in it or not, especially if renting it out is generating you an income that leaves you cash positive after your own rent is paid. think about it!

[ginzillas]

I know! Lots to consider. We need to do some thinking..