‘Gap yah’ with kids - what would you do?

[MilkMouse]

We’re lucky enough to be able to go away with our 2 pre-schoolers for a year - as one full time parent and one working remotely - next winter.

To afford this we will go abroad and live in a cheaper country for the year.

What would you do?

1. Sell house and put the £130k capital into a 1 year ISA (around £5k interest). Buy another house upon return

2. Rent out house for a year (around £5k rental income after mortgage payments)

I have very little understanding of property, the housing market or money, so I’m posting to you wise people as I’ve probably overlooked something important.

We have a 3% mortgage fixed for 2 years. Early redemption fee for option 1) would be £1k. We were planning to sell the house and upsize in the next few years anyway. We have no savings.

There is talk of doing away with no fault evictions , I’m not sure of the time scale but would make renting it out a huge risk as essentially you wouldn’t be able to get rid of your tenants as long as they were paying rent

Are you allowed to rent out your house under the terms of your mortgage? As far as I'm aware, most regular mortgages won't permit this, so you'll need to change to a buy to let mortgage. Even if you can, you need to factor in other costs such as insurance and management fees.

We were in a similar situation a few years ago. We worked out that the rent wouldn't cover all of the costs.

If you sold you'd need to factor in estate agent sale fees plus solicitors sale fees. You'd also miss out on any amount that your house would have increased in value over that year.

You have to factor in the other costs of selling and buying - EA fees, legal fees, stamp duty.

ISA investment is restricted to £20k a year isn't it?

You need to consider tax, what reporting requirements you'd have in your new country as well as the UK.

You also need to pay tax if you rent. You can contact your mortgage lender and get advice on renting (I wouldn't do it without telling them).
We did it and even though the rent didn't cover the mortgage, it was worth it for us as it meant not having the hassle of finding somewhere when we got back (as well as not having to get back on the ladder after years out of the market). Plans can change so it's worth thinking about what would happen after years in a cheaper country if you wanted to come back.

Bear in mind that if you are working remotely in a foreign country, you may well end up with a tax liability in that country as well as the country where the income is sourced (presumably the UK?). Double tax reliefs are available, but you need advice from an accountant with knowledge of international tax matters (or at least knowledge of the rules in the country you're staying in).

Thank you all so much for taking the time to give such helpful replies

@Lastqueenofscotland2 a good point. I was thinking of letting it to someone specifically looking for short term but it’s always a possibility.

@LizzieMacQueendoh! A major flaw. Thought that interest was too good to be true. Thank you for pointing something I should have figured out!

@FuglyHousewe should be able to get consent-to-let for a £120 fee but that’s not definite

@PragmaticWench @TomTraubertsBlues
good point about fees. I was wondering if prices might drop a lot during that year but it’s obviously a complete unknown

@Motheroftweenagersthank you for shari ng your experience that’s really helpful and a good point

Thanks. The income is below the personal allowance (!) so will not be subject to tax even abroad and will be treated as non-resident by the host country.

One of us will do also do a small amount of work in the country and will pay tax on that.

There's a major factor here - do you like your house?! If you do then in your position I wouldn't sell it for the sake of a year away.

definitely rent out your house. buying and selling is v expensive and high risk. much safer to hold onto the house even if you don't make much money.