AIBU to sell my rental property to reduce our mortgage?

[YellowDaffodil25]

If you had a £800k mortgage on your residential property, and a debt free rental property valued at £350k, would you sell the rental property and use the proceeds to pay off part of your residential mortgage? Coming to the end of a 5 year fix on the residential property so will see a big jump in the interest, and therefore monthly mortgage repayments. The rental property is currently empty and would need maybe £40k investment before it can go back on the market, but would probably achieve a 6-7% yield pre tax. Have always seen rental property as an additional income stream/pension income for the future but with interest rates where they are, and the headache that now comes with being a landlord, AIBU unreasonable to cash up the rental and pay off part of the residential mortgage?

I would check first of all whether you will be able to remortgage for £800k when your joint income is £130k.

Absolutely not. The rental property (once you get it on the market) is free money. You keep the equity and get money in to cover your existing mortgage. I would be taking 40k on the rental and using it to get it market ready ASAP.

the moment you sell the rental you are gaining nothing, keeping it means you are gaining every month that someone lives in it

Will you even have a choice?

Have you checked yet to see if anyone will remortgage you at over 6x your salary with less than 20 working years left?

I'm guessing you will be at the higher rate of LTV too with a mortgage that high, so interest rates at the higher end of the scale and nowhere near the 4%

Best off selling the rental and reducing your risk. You can't be enjoying much of a high earner lifestyle with mortgage payments that high, decrease the payments now to enjoy your pay while you can still earn it

You don’t get a new creditworthiness or affordability check on a remortgage with the same company, you just choose a new deal

Sell your rental - it’s too much hassle to be a LL these days

Depends on where the houses are . If London, I’d keep both of them. Sentiment is low, but ignore it, there isn’t enough land and demand outweighs supply.

Sell, that’s what we did 2 years ago. We were lucky that the rental paid off all our mortgage,but I still think it’s the right thing for you. Your income and mortgage outgoings don’t tally so must be causing so much strain on your finances.

Who owns the rent property? If one owns it then sells, the money will go into the couples home, latter if, a split happens in the couple, the one who own the rental has lost their money in the couple’s pot.

I would think about selling the main property (so no CGT) and then moving into the rental.
live in the rental for a few years and then sell that as your only property.

Use the proceeds of both properties to buy a mortgage free property - cheaper than your current hose, but more than your rental value.

unless you think the non working person will pick up another job soon, it will be much less stressful please to have no mortgage. Overall you could have a better life,

what @Washingupdone says. So much depends on if you’re married, strength of your relationship and any ring fencing of your prior assets. If you’re cohabiting in England, your partner is flighty, or has lots of heirs who arent also yours … well, you’d be absolutely mad to put your money into a shared pot. Too many unknowns.

Sell, sell, sell.
Don’t forget 55 is the new 65. If you lose your job in your late 50’s that might well be the end of your profitable working years.

Some terrible advice on this thread.

What are your outgoings? Do you have any unsecured debt? Or other savings and investments what part of the country is the rental property in. Not all postcodes are born equal. Do you have pensions? What are they worth? How much do you contribute monthly? No one can give you better advice without knowing this.

I couldn’t sleep with that mortgage…

I would love to sell our rental flat, it would clear the mortgage on our house and I love the idea of being mortgage free. I have to grudgingly accept that it doesn't make financial sense. The rent we get covers both mortgages and the value of the flat has steadily increased. I think keep the flat if you can.

We might eventually encourage DD or DS, or maybe both, to move into ours in 10 years or so if they don't have their own place as adults.

I would, being a landlord seems such a hassle with one property.

Same here, too much hassle, such a weight off my shoulders when it was sold.

I would sell

This. OP would be able to stay with the same lender and no questions asked as long as they are not behind with any mortgage payments.

It’s not free money. The cost is the extra £350k mortgage they are paying on the main house.

Plus tax plus risk of tenants trashing the home plus risk of getting tenants out. It’s not an easily accessible £350k once you get tenants in again, have to allow a year from decision to money if the tenants leave on time.

Far too risky in your 50s with one salaried income.

Definitely sell the rental property. With CGT and Income tax and all of the new legislation around rental standards and difficulty in removing tenants it's simply not worth it if you are a higher rate tax payer. We are selling ours since the maths doesn't stack up.

We have worked out that the only time it is worthwhile is if buying a second smaller property that you will then move into on retirement hence making it your principal residence and removing the CGT liability. Even then it isn't as financially sensible as it used to be since you now pay more stamp duty on the second property.

There would be nothing at all would make me sell my rental while I am able to afford my mortgage.

Every month I get better off overall…I don’t understand why anyone else would say to get rid of it. Especially as with just one person having an income any tax burden can be offset by having the home in the second person’s name.

I don’t even have mine to make a profit, I charge below market rate and cover the mortgage, but now it is almost paid off, it’ll leave me with a nice nest egg for the future with a guaranteed income, particularly useful when I’m not from the generation of mega pensions

Your mortgage is really high...

I would definitely sell the rental property or even consider selling your main home and moving into the rental yourself for a mortgage free life.

IMO you'd be crazy to keep it.
BTLs are going one way only and you are late to the party. most guys i know in that game were shutting up shop pre-covid..we bough in 2019 and actively chose not to keep my flat as a btl because expected it to be a poor return / headache.

S&P500 or whatever doesnt need maintenance, the sink doesnt block, there no voids in interest, tenants cant trash it...

You are presumably living in a 1m+ home on 130k gross that is tight. If there are redundancies and that salary disappears....
Aside from that the interest on 800k is going to be absolutely punishing.

Have you calculated what interest rate you'll be paying when you remortgage. 800k is an eyewatering amount of borrowing.

Sell as soon as practical.

The day you have no mortgage will be one you will feel a great sense of relief.