Should I sell flat to pay debt and privately rent?

[booksandchoc]

Hi guys, hoping for some advice... I know the answer will probably be to do it but I'm getting excited about it and think I may need to reign myself in.

Our flat is possibly worth 60k, mortgage is about 38k, debt is about 16k. Atm I'm not in a position to buy or remortgage.

We have just had a look at my mums friends house which he is planning on renting, he has a lot of properties and this one would be perfect for us. 3 bedroomed house with big garden compared to our 2 bedroom flat (which does have a big garden aswell)

Our mortgage payment is £200, rent would be £500 but after clearing all debt and homeowner associated cost we would have double the amount of spare money than we do now after all bills are paid.

Is this a no brainer? I've always said I would never privately rent but we are really outgrowing our flat with DD, we have no storage space or attic space, it would only be short term (5 years) till I get my degree and we are in a better position to buy and could possibly negotiate buying the house we are renting.

Thoughts anyone?

there is the obvious one that this drops you off the housing ladder. But equally this plan could work.

if you are going to rent from a friend, keep it all business like and professional. That means proper tenancy, deposit protected (landlords' responsibility), gas safe cert (ditto). If he is a professional landlord this should all be what he does as a matter of course.

also if you want to stay five years, discuss that with him. You won't no rent increase for five years because of inflation, but if you can work out a deal with him, you get a secure home for the time concerned, he gets a long-term tenant and everyone wins.

finally, remember that inability to pay the rent due to job loss is not the landlord's problem, so think about what backup you have and look to build up savings.

Thanks for replying specialsubject. I'm happy to drop off the property ladder for now, hopefully in 5 years time I will have a much better job after graduating.

He has a few properties so I know everything will be done properly and we are more acquaintances than friends so it will be kept professional.

I didn't realise I could get such a long term tenancy so that's good to know, thanks for that.

Hopefully I will have some money left over from the flat sale to put away, plus I will finally be in a position to start saving. I've been wanting to get some emergency funds behind me for a while and I can never manage it.

minimum term for an assured tenancy is 6 months but there is no maximum.

I know someone with the ideal situation of a four year tenancy, I think they agreed a rent increase at the start but it is then fixed, same way as the utility companies work it. Everything is up to negotiation.

the other issue is that their landlord is quite elderly and this protects them should he die during the four years. The property may be sold but that does not break their tenancy.

It might be worth getting some professional advice to see if there is an alternative way. Christians Against Poverty (CAP) run an amazing free service which help people get out of debt by dealing with your creditors for you.
But then if you really want a bigger place anyway, it might be a good option.

I would say no, because you will always need a roof over your head. the percentage of your mortgage that is paid will increase, but if you rent indefinitely the amount you need to pay in rent will not go down.

it's not like you're in negative equity. You have a modest flat and you do have equity. I think you'd be mad to sell.

How did you get so much into debt?
Are you pretty good at budgeting and managing your money?

Asking as i wonder if you might get back into debt again, and then would be without an asset to 'bail you out', iyswim.

Sorry, just seen these extra messages. We've decided against selling and going to really focus on paying down debt, tbh we have got into this situation because credit was easy to come by and we have always managed to pay it. Now I've taken a pay cut so we are feeling the squeeze a bit. Going to sort out a repayment budget and snowball all the debt, then in 5 years we will be in a better position to buy and hopefully have some savings behind us with only the mortgage as debt and a decent amount of equity to use as a deposit. Earlybird you hit the nail on head, we probably would end up back in debt, that's a habit we really need to break.

One more thought for you, let yours out and rent something bigger ?

Don't want to be a landlord tbh and doubt I would get to change my mortgage to BTL.