WIBU to clear out our life savings

[PumpkinMeadows]

So, we were supposed to be selling our home and buying a new one. Two days before we were due to exchange, our buyers pulled out (no real reason given, though said they "may" change their minds again in a couple of months ).

Anyway, the home we were buying is already a little bit of a stretch for us - but should be manageable. We managed to get together a 25% deposit, which was no mean feat.

Our sellers have given us two weeks to find another buyer, or the house goes back in the market.

We are of course considering that option, but time is against us.

Spoke to our broker who said we "might" just be able to get a let to buy mortgage on our current property, so we wouldn't have to sell it, then use the equity from there to buy our new home.

If we did this, we would have to reduce deposit to 15% and also clear out virtually every penny we have in savings. Mortgage payments would also increase by just over 25%. And of course the interest rate is a lot worse than on the current deal we have, but we would still fix for 5 years.

We would likely make a small profit on the first home on the rent, but it wouldn't come close to covering the additional 25% mortgage. That said, it's all theoretically doable based on our joint income (assuming we can even get the mortgage).

I'm just worried about having no savings at a time like this, considering the way the economy is going...but at the same time, we don't want to lose what we consider to be our "forever home".

Or should we be happy enough to know that at the worst, there is a property we could sell (albeit probably not very quickly) if we had to...

*ps - Name changed because family/friends know my regular user name.

Hmmm, this change to the rules is giving me more pause for thought than anything.

I thought it would - in the long run - better to own two properties. But if existing landlords are looking to get out of this business, not sure it's something I want to try out as a newbie...

The insights are much appreciated.

I'm a landlord and am not looking to sell up. I'm not overly phased about the proposed changes really and it works for me and my tenants. It may change in the future but will address that as/when.

I wouldn’t you will be overly invested in property really given we are on the brink of recession.

Hi Op, we did this two years ago. Everything worked well for us (so far!) and no regrets. First year was a bit stressful as we didn't have any savings left but we've managed to build them up again.
Our old home went up in value as well as the rental income. In the worst case scenario you can always sell your old home and pay off the mortgage.
Good luck!

Here's a thread if you want more insights
www.mumsnet.com/talk/property/4577781-if-you-are-a-landlord-are-you-thinking-of-selling-up?page=1

I am a landlord, and I am part selling up. I am not a typical landlord and have different reasons for selling (largely around sub-optimal finance and different uses of my capital, not eviction reform, EPC or tax). In your situation, this wouldn’t bother me. Being fully stretched in these uncertain times, would though. You do need cash reserves, but if you have good jobs and being fully stretched includes a certain amount of luxury, which gives you wiggle room, I wouldn’t worry about it, providing you have a plan to build cash reserves reasonably soon, your property isn’t falling down and will make a reasonable profit going forward. Obviously only you know what those numbers are.

Be aware that you will be utterly vilified, at least online (this has never happened to me in person) the moment you reveal it. This doesn’t worry me much in itself, but if you use any form of online advice or support that’s not specifically for landlords, then you may lose that (this is fairly new in my experience)

I think any sensible landlord needs a chunk of savings behind them.

Is the plan to sell the first house at some point. any profit will be subject to CGT won't it?

I think the economic climate is pretty dodgy & I reckon at some point there will be increases in taxes that aren't income or a wealth tax. My inlaws & their friends have all started getting rid of additional properties.

@PumpkinMeadows

There are a few ways to try to mitigate risks. Obviously full background referencing for prospective tenants, rent guarantee insurance, a home owning guarantor, etc.
There is no real alternative to having the means to fund the property if there is no income.
There is no ‘can’t afford’ as a landlord. The law is firmly on the tenant’s side when it comes to repairs ( and again this is due to the minority of poor landlords), so if your tenant owes you 6 months rent and the boiler breaks and needs replacing you have no choice but to get the work done.
As I have several properties I can use them to fund each other if necessary, and that is how I manage this risk.
We are hopefully very unlikely to have something like lockdown again, but that was a real problem as I had some degree of issue in every property.
I used to have 3 small HMO type shared properties, and have moved away from that for all but one, due to the huge increases in fuel prices.
I am not looking for more properties. I don’t have any currently advertised for sale, and nor have I given tenants notices to quit, but I have one house that I will definitely look to sell if it becomes vacant.
If I was approached by a landlord wanting to buy the remainder of them with tenants in situ I would probably sell.
I assume that larger landlords with perhaps 10+ properties are in a better position as they can spread the load more, and have flexibility to offer alternative accommodation if necessary.
My view of the proposed changes are that, whilst I can of course see why people want secure tenancies, it will lead to reduced supply, which will make it harder for people to move on, and when the landlord finally gets the property back they may not be so keen to re let. That obviously depends on the sales market at the time.
If you do decide to go ahead I would recommend developing a thick skin. I have never had any issues with people openly criticising my choice to become a landlord, but the last 2 properties I advertised had 20+ applicants, nearly all were in unsuitable accommodation and desperate to find somewhere. I found it genuinely upsetting having to turn most of them down.

That would be far too risky for me. Sounds like a broker after a commission not working in your long-term interests.

Stick your current house back on the market at a slightly lower price marketed at cash & chain free buyers only. If it doesn't sell, I would look for a cheaper property or wait for another year to assess how the market is. But do not stretch yourselves to buy the ideal house because of the cost of living rises.

Don't go for the buy to let mortgage and do not clear out your savings, this is sheer madness.

Be aware that you may not actually get a BTL mortgage in time, we are months down the line and have already had one offer withdrawn and the interest rate upped at an unprecedented stage in the process.

The levels of information required is also far in excess of an needed previously and stress tests are very high.

Being a LL with no cash behind you would be madness.

I barely broke even last year because of a succession of events (boiler died, then a window was accidentally broken, then a void period, then the usual costs of freshening a place up and getting new tenants) and that’s in a property that has no mortgage.

If you can’t afford expensive repairs tomorrow, or a non-paying tenant, then you can’t afford to be a LL imo. It’s not something to take on lightly.