What would you do?

[solittletimeandsomuchtodo]

We have the following considerations and interested in your opinions.

We are moving to an area out of a large major city.
Move is happening regardless - better schools. House has been found.

We own two properties - 2/3 bedroom flat currently rented out. Tenants leave shortly. Twelve months ago this flat was our family home. Moved into temporary accommodation in work premises to save money (saving didn't really happen??)

Flat is same value as new house.

We can either sell flat and buy new house, move mortgage over.
or
keep flat, it is a very good rental and will always will be. Rent covers mortgage (mostly)
By keeping the flat we would be getting a secured loan against this to pay for deposit and fees for new home.

So by going with second option we have an additional monthly payment on top of mortgage (advisor has not given exact amount) but also a rental property/investment for the future.

By going with first option we are taking the 'safer' option.

Worst case scenario - no rent coming in, two mortgages to pay, we couldn't do it.
We are selling within three years so no capital gains to pay (correct??)
We would be selling at a profit, good area so shouldnt be any problems selling it now or in the future.

Hope I've given enough information. (trying to avoid a drip feed)

Bear in mind that if you retain a property whilst purchasing another, any mortgage lender will a) demand a minimum of 25% deposit, and b) put one of your mortgages onto unfavourable BTL type mortgage rate (I.e. around 5-6% at present)

Hi OP

We were in a very similar situation we went with option 2. However, most of the time we wish we hadn't. This is mainly due to us worrying about the flat, as we would also not be able to cover two mortgages. We have had a few issue arise such as the boiler breaking down, this led to a costly repair bill and v unhappy tenants.

You can take out a type of insurance, which will cover up to 90% of the rent if the tenants fail to pay. I think this is called Rent Indemnity Insurance and costs us roughly 5% of the rent a month. You will also have to pay tax yearly on any income gained from the flat. We are now sorting this so I am not to sure of the costs but I don't think its very much.

Sorry I am not that swept up on it as DH deals with all of it mainly, but I hope that helps in someway.

I think it just depends on what?s right for your family & area. We would love to sell but cannot until the prices rise in our area. The loss we would make would be massive

Tann - we have a BTL mortgage at the moment, just signed over, no change in rate, when we moved out and rented it out.

Thanks Clargo55 - interesting. I personally hate being a landlord as things always seem to go wrong. Will make sure our next ins policy is tight and covers rental arrears.
The sensible/long term hat is the problem - would we ever be able to buy something like this again? (great for DC's once older/pension fund as well as we are self employed)

just don't know......

You say you own two properties - I understand that one is the flat but what is the other (the temp accomodation?)
A few thoughts: Would a lender be OK with you using a loan for a deposit? Wouldn't this essentially be a 100% LTV mortgage? If it was OK, how would the repayments on the loan affect the size of the mortgage you might be offered? If the market is falling in these areas, are you happy doubling your exposure to falling prices? Do you think a business model where rental income doesn't cover mortgage repayments, even given historically low base rates is sustainable? Do you have provision for potentially long voids, costly maintenance, eviction processes etc.?
Also, as far as I recall, there may be some capital gains to pay as it has not been your primary residence for the duration, although you may get some private residence relief as you have lived there (it can be quite complicated to work out).