Sell house rented out?

[Mamimawr]

I can"t seem to get my head around this. We still own our previous home as it wasn't a good time to sell when we moved into our new home. We now have a tenant living in it paying £600 a month. The house is probably worth about £130,000, we have no mortgage on it. But we do have a mortgage of about £160,000 on our new house which is worth about £270,000. The interest we will pay on this mortgage is over £25k over the next 20 years.

We can afford the payments as we are but selling the old house and clearing most of the mortgage would be nice and less haasle.

What I can't work out is if we get £110,000 ish rent (minus tax) over the next 20 years, is it worth keeping the old house or should we sell it to clear most of the mortgage? WWYD??

It depends on your current circumstances and likely house price increase in the future of the old house. If house prices are likely to increase by more than 25k say over the next 5 years or so I would stick with it. It's rental income and capital appreciation you should consider.

Or at least wait until this current tenant moves out, whichever is soonest. If your struggling to pay the current mortgage then yes sell the old one. But check there's no penalties in redeeming your mortgage early, some mortgage companies only allow 10% overpayment per year. You could always put that £600 rent straight to overpaying your current mortgage which would decrease the term and the interest.

Remember if you make a profit on the sale of your rented property you may have to pay capital gains tax if it is our with a certain period that you brought your main residence.

You'd be crazy go sell it. We have a housing shortage. Mark my words until this is sorted you will see the value go up

Your existing mortgage debt will be eroded by inflation over the years.

Cash out now and you'll be leaving money on the table.

The house have no mortgage, why not use 50% of that rent and overpay the mortgage on the house your living in.
You will be amazed at how soon the mortgage will be paid off.
Make sure to inform the bank/BS that you want the overpayment to be paid on the principal.
If the living house is an endowment mortgage, change to repayment do as suggested above, but keep the endowment going as well.
This is what I did, paid off my mortgage and received the endowment payment when it became due.

bear in mind repairs, maintenance and void periods - what will need doing on the house over 20 years (boiler, roof, new kitchen, carpets etc) if let furnished, then new furniture etc

Interest on your mortgage is more than you are getting in rent.

Use the rent money to pay down your mortgage . Keep the house

Reminder your current mortgage will only reduce & your rental income will only increase. It's win-win to keep it. You do need to be aware of CGT though. Why not see an IFA?