To sell or let out?

[eternalflame2020]

I am so confused by the whole thing!

I am living in my first property, a one bedroom flat and always thought that I would keep it for a few years, save up another deposit and buy a second larger property.

Now, 18 months into the mortgage my life has changed completely and I would like to move into a bigger property this year. I have a 3 year fixed mortgage so there will be a settlement fee of at least £5000 unless I port it to another property?

Now having actually looked at the costs of buy to let mortgages and insurance, and capital gains etc I'm wondering if it's even worth it or I'd be better using the equity towards a new mortgage. There should be around £25000. I will be in my 60s before the mortgage for the flat is paid anyway.

Any advice or clarification on the benefits of keeping the flat or of selling would be very welcome!!

Why wouldn't you just sell and port the mortgage. That seems to be the most sensible course of action.

@sprig1 Because I am self employed, I always saw the flat as an asset and a boost to my retirement fund. Maybe this is blurring the obvious!?

If you keep the flat you will be liable for the higher rate second home stamp duty on the next one you buy. Have a look at a stamp duty calculator to work out the difference. It will be thousands more.

Will rental income pay the mortgage?

Can you afford two mortgages?

I would say that it us a risk not an asset. It's v hard to make money from letting out 1 property now. What about if your tenants don't pay/trash the place/refuse to leave? Or all of the above.

Not just will the rental income pay the mortgage , will you have enough left over or other money to pay the tax due on the rental income each year? As well as other outgoings, service charges as it’s a flat and maintenance of course. Mortgage interest can no longer be claimed so the tax implications are huge especially if you are a higher rate tax payer.

@badgertastic oh, thanks for that. That's definitely one for the pros list of selling the flat!

@theunamedcat yes, the rental income would cover the mortgage but being self employed it could push my into the next tax band. I couldn't afford two mortgages in the long run and hadn't considered that there might be times where the property is empty and I'd have to make the payments...

Talking this through is helping make things clear in my mind, thanks!

I'd sell and move into the right property then look at BTL when you're in and settled

In order to take out a residential mortgage on a new property you’d need to convert the current mortgage on your flat to a BTL one, which would come with particular requirements such as the flat must be able to produce a rental income of between 150%-200% the monthly mortgage payment. Most BTL mortgages will also only lend up to a maximum of up to 70% LTV as well, so unless you have a lot of equity you may not qualify.

How are you going to save enough of a deposit within six months to buy another property without selling the flat and retrieving the equity?

And yes, as previous posters have mentioned, you’d pay additional stamp duty on your new place.

@sprig1 that's a good point. I hadn't thought of those implications initially.

@ComtesseDeSpair I hadn't realised about the 150%-200% but I think it would be enough. I have savings for the deposit of the next property. I would have saved enough by September/October but could get ball rolling sooner if I could use some of the equity from sale of the flat.