Two properties or one

[Sealant]

Me and my partner are in a very fortunate position and own a property each, both are worth very similar amounts but one had a slightly larger deposit. We now live together in one of the properties and rent the other out.

We have just had a baby and are considering moving to a bigger family home but are unsure what would be the best approach in terms of retaining or selling the properties.

We'd ideally like to keep one of the properties but are concerned that on top of second home stamp duty we'd have two mortgages on higher interest rates due to the lower loan to value so will be paying less of the actual mortgage each month.

I've tried to find advice online about this (before we go meet with a mortgage/financial adviser) but can't really find anything useful, so thought I'd ask the lovely people of mumsnet if they have any advice/tips/experiences that may be helpful to us.

Well, you need to consider the tax implications of renting one out and see that you have enough contingency to cover things like boiler replacement (probably easy if renting out a 2k flat in London but could be tricky if it's a cheaper area with £300 rents and a few repairs on top of mortgage and service charge could be a complete drain on your other resources).

If you buy a bigger family home, I don't think you'd be liable for more stamp duty as you'd be moving your home (main residence). Also, look at the capital gains tax - if the property was your home and it's only been rented for a while, there might be none to pay. If you keep it for another 10-20 years, you could be liable for a lot so check your numbers. If you invested more in a big family home and down the line decided to downsize to release equity for yourselves or children, you wouldn't have tax to pay at all.

I don't know what the reason for wanting to keep the rental is, but there are also other investments that could be considered, especially if you sell it and get a family home. For example, pensions. ISAs, LISAs, Junior ISAs etc. A lot of them can offer excellent returns (in stocks and shares) but unlike rentals, you won't be liable for tax and there won't be a big debt to service or worry over interest rates or insolvent tenants.

To share our story, we started off in similar circumstances (but with even more properties when we met). We prioritised our needs (and wants tbh) so now live a fancy house. The number of rentals has shrunk to reduce stress levels and make things work with taxes and long-term plans. These days money gets invested mostly in stocks and shares (as much of it as possible through pensions and ISAs). I love how little hassle that involves and it's easy to access the money - takes a day or two (compared to taking months to sell a property) so it's good to have that sense of liquidity and not having all our eggs in one basket.
It's also great as you can move your investments quickly so go from investing in the UK to investing in the US or China in a matter of hours.

Read the million-and-one threads on MN about why being an unmarried mother may not be a good idea.

Speak to your conveyancing solicitor. You need to sort out some big questions like: do we get married, how do we buy the new house (joint tenants or tenants in common).

It might be an idea to sell both properties. You can then buy your new home without the additional stamp duty, ?get out of rentals before the bubble bursts?, have more money for the baby, invest elsewhere. You can always get back into rental at a later date and buy somewhere specifically for this purpose with good capital growth and yield % (as opposed to you ex-home, which just happened to be there). Maybe you could buy the new property in DC's (or, with an eye to the future, DCs') name/s.