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Original poster

In a dilemma- wwyd

45 replies

googlenut · 07/02/2012 18:19

We have decided to rent out our house as we couldn't sell it, As we have such a lot of equity in the house we can borrow a sizeable sum and buy our dream house in our ideal location (walking distance to all kids schools until they finish). It would be an excellent buy as motivated seller and we can move fast. It could be our retirement nest egg. But we would have to watch our spending on other things, maybe go without holidays and not give our kids all the experiences we would like.
Or we could go for a cheaper property in another location. The house has everything we need and we would be happy there. But I would have to drive three kids to school for years and this property not so much of an investment. We would have loads more cash flow though.
So we are in a dilemma. Dh and I are quite risk averse but don't want to kick ourselves that we didn't take the opportunity with the first. We also have a disabled child who we don't know if will live independently so also want to invest for his future

OP posts:
recall · 07/02/2012 18:26

If it was me, I would definitely definitely go for the first one, your dream house. It is going to be tough anyway with the three kids. You will be happier in your dream home where you can all settle. We live in our dream home, we rent it. We don't have expensive holidays, but we have lovely summers here enjoying the huge gardens etc. The school run will drive you mental, so if you can reduce that, it will save you hours of stress.

I always think that if your day to day life is good, holidays aren't as important, because you don't need to get away so much, staying is quite good Grin

WMDinthekitchen · 07/02/2012 18:30

Difficult... I am not homey person - I like being out and about and so might go for the cheaper property to give me cash for activities, holidays etc. Everyone needs a good place to live in but once you have that, what more do you need? Dreaming about houses is not my thing. Whatever you decide, hope you enjoy it!

HJisthinkingofanewname · 07/02/2012 18:37

The holiday stuff might only be for a year/2 until y

HJisthinkingofanewname · 07/02/2012 18:38

You sell the other house. So not a huge sacrifice against dream home + short school run.

AgnesBligg · 07/02/2012 18:51

First house without a doubt.

oreocrumbs · 07/02/2012 19:00

I would rent out your house and push for the dream house, as long as you are not pushing yourself too much financially. Just bear in mind that there will be times your rental house may be empty, so you would have the mortgage, insurance, C Tax etc on that property too. Would that push you too far? Also will you have the money to hand to pull out for tenants when they need something - e.g a new boiler - you can't put that off, would you be able to pull out £2500 straight away?

Other than that go for it. There is not a fortune to be made in renting a property in the short term (unless you have very little or no mortgage), but as a long term investment you have a house paid for at the end of it that you can use for whatever Smile

Original poster
googlenut · 07/02/2012 19:41

I thought loads of people would tell me to go for the safe option-so reassuring that you think we should go for it. Getting rid of the school run would be a big plus, especially as the kids get older and can walk to school.
Just on council tax-surely there would be no tax payable in the rental property if it was empty?

OP posts:
Levantine · 07/02/2012 19:44

First house, definitely

oreocrumbs · 07/02/2012 21:01

You get the council tax reduced by 50% if it is empty but furnished, and free if it is completely vacant (or something along these lines), but only for 3 months I think. This may vary by area, but my tenant left in October and I got it free untill Christmas, and now I am on special reductions as the house is not fit for habitation so they have extended it while we refurb it. (House was monumentally trashed by tennant - I wasn't renting out a deathtrap, just to make that clear!) But if it is vacant for a long time (unlikely unless you are very unlucky), then you will have to pay it.

I always sound like a real doom sayer - I just like people to be aware of the pitfalls, as I seem to go through life learning lessons the hard way! I'm much more possitive IRL occassionally Grin

NotYetEverything · 07/02/2012 21:04

This reply has been deleted

Message withdrawn at poster's request.

Original poster
googlenut · 07/02/2012 22:02

Doesn't make sense to sell it as we will make a good monthly profit from renting it out.
We had a house down south which we rented out until about 3 years ago and it was empty for 6 months and we didn't pay any council tax. Is this a new thing?

OP posts:
oreocrumbs · 07/02/2012 22:12

It might be different in different councils but its been that way for as long as I can remember up here. It might be 6 months not 3 (I presumed 3 months as that was how long they gave me before I got put on this special reduction - but that might just be the way they do it when it is known the house will be empty long term). I havn't had the house empty for more than a month in the past so it has never needed to apply to me! Might be worth having a look on the website of your local council to see what they do.

I still think that renting out a house is a good option though, especially if there will be a good profit in it Smile

Original poster
googlenut · 07/02/2012 22:25

Just had a look and it looks like council tax is exempt for 6 months Smile

OP posts:
oreocrumbs · 07/02/2012 22:29

Oh well thats good! Anyway, I would enjoy planning your dream home, leave the doom mongering to miserable grumps like me!!

Original poster
googlenut · 07/02/2012 22:32

No it's really useful information!! We need to look at worse case scenario. Two lots of council tax would be £400 per month, so substantial. Will phone council to double check.

OP posts:
NotYetEverything · 07/02/2012 22:35

This reply has been deleted

Message withdrawn at poster's request.

choux · 07/02/2012 23:51

How are your finances? Is your income safe or could you be made redundant? It's quite a stretch to have one house which you HAVE to rent out to pay the mortgage and another house with another mortgage that you actually live in. Have you checked out buy to let mortgage rates and done the sums on your expected rent and likely expenses of renting it out?

What happens if you can't rent your existing house out? If you can't find a buyer are you sure you'll find a tenant?

Have you thought about keep reducing the sale price on your current house until it sells. At the right price someone will buy it and then you are free to put all your funds into your main home and be less stretched and more prepared for a downturn.

myron · 08/02/2012 00:06

Am I reading this wrong? You have significant equity in the house you are considering renting out since you can't sell? And you think that you can borrow a sizeable mortgage for another house on the basis of this? Do you mean that you can remortgage and increase your LTV on your existing house in order to fund a deposit for another? This was easily available in the past but not so easily available now. Good Luck and visit a broker.

myron · 08/02/2012 00:24

Sorry - read your OP again. We were in a similar position back in 2008 and the credit crunch bit in that we had 2 sets of buyers who could not get a mortgage in the summer of 2008 (to buy the house we had put on the market). And so, we became reluctant landlords, having relocated across the country, we rented in our new location. We decided not to buy because without selling, we would have only been able to afford a modest house (with a large mortgage) and what we really wanted was to realise our equity and go for our long term large family house (with a relatively small mortgage). There is no right or wrong answer here - just what you want. A more frugal lifestyle for long term capital gain or a more comfortable living now. We ended up renting for 4+ yrs before we evenutally sold our house/realised our equity and have just bought our long term family home.

Eurostar · 08/02/2012 00:53

OP - are you saying that you will raise a let to buy mortgage on this dream house and then also have a mortgage on the dream house? This sounds like a big financial weight on your shoulders.

When you say that money will be tight, is that based on current interest rates? How high have you budgeted for interest rates to go? Your let to buy mortgage is not likely to be one that can be fixed for a long time at a low rate I'd imagine.

How much would you have to reduce your house by in order to be able to sell it? Have you had any offers on your house? Has the estate agent passed on any tentative low offers so you can at least know what your current house's sale price is?

Original poster
googlenut · 08/02/2012 07:35

The current house we only bought a few years ago so we would loose money if we sold it- we get a btl mortgage on this (have already seen financial adviser about this). We take out a deposit for the dream house and get an interest only mortgage (first house is repayment vehicle plus have 75%LTV so interest only still possible. )

We can afford to pay everything even if we don't have a tenant. But the question about interest rates is a good one. Me and dh are cautious by nature so it is a worry if rates go up. But this is a 10 year plan and how worries should we be that interest rates will go up to say more than 8%?

OP posts:
myron · 08/02/2012 10:01

Since I'm not that anal about disclosing figures and I don't suspect my identity to be outed - Capital asset of 500K. 20% LTV. Rental income of 18K which was approximately double our mortgage payments BUT.....ROI was pants. After expenses, it was

choux · 08/02/2012 20:00

Newsflash: Santander restricts IO mortgages - must have 50% equity.

Original poster
googlenut · 08/02/2012 23:16

We've got an independent financial advisor so the figures stack up and we can get an IO mortgage

OP posts:
Eurostar · 08/02/2012 23:28

Who knows with interest rates? 8% is not much higher than the long term average I believe but times are very strange now.

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