Sell house or rent out?

[Bunky123]

This is totally a first world problem but...

We moved house 18 months ago. We bought on an interest only mortgage to make us a 'chain free buyer'.

Our plan was to sell our old house and keep the money in a high interest account to pay off our new house when the mortgage deal we're on expires, and (as we downsized) replenish our savings, every penny of which was used as a deposit.
Our current mortgage deal expires in 3 years and we're worried that we may not be able to remortgage on a decent deal / at all if markets aren't in our favour then.

But, old house still hasn't sold. The old house is in a good area and would usually sell quickly, but very shortly after we moved the interest rates went up and all our viewings dwindled. Offers came in at first but got withdrawn as interest rates rose further. We currently after many months have two offers on the table, one £50k less than asking price, by someone who needs to sell his house first and hasn't had any luck so far, the other by a cash investor for £70k less than asking price who can complete within 6 weeks if we're game.

We're wondering which one to go for, or whether to just rent the house out instead and slowly build savings up again from the rental income.

Wwyd?

Well, without actual prices it is difficult to say anything, £70,000 reduction on a £170,000 house is huge, £70,000 reduction on a £700,000 house is only 10% so perfectly reasonable

Fair point! It was £600k.
More just wondering whether keeping and renting it out is more lucrative long term. But I feel like paying off the house we live in is more important to me

Are you higher rate tax payers? Is your old house mortgage free?

If we imagine you rent your old house out for 2k each month you would make £1200 after tax at 40% (if we just ignore expenses for ease) - but there will also be expenses so you will make less - let's say net £1000 a month.

Now how much would selling the old house any paying off the new mortgage save you each month?

Consider the example above with your own rental figures.

What this doesn't take into account is that both properties might gain equity over the years with house price rises. Any gain on your old house from now would be subject to capital gains tax (after allowances) as it is no longer your main home.

Oh this is a good way to look at it. Balancing it all out we'd make £600 a month before paying for wear and tear etc. To me it's not worth the extra work. Especially with the loss in cgt exemption if we don't sell soon.

BUT the buyer has dropped their offer to 500k which I feel is taking the piss a bit.

If the house hasn’t sold in 18 months at 600k then it’s not worth 600k.