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To sell or release equity for new house deposit?

4 replies

eligkab · 13/07/2023 15:48

Hello,

interested in people’s perspectives on what to do in my situation.

I currently own a 2 bed flat and have a lot of equity in the property as have always overpaid. Have circa around 80k to release if needed.

Me and partner want to move within the next year or two as we have 2 daughters so want a bigger property etc. but I am wondering whether to sell my home and use the money off the sale for a deposit or whether to remortgage to release equity, rent my current flat out and use the equity as a deposit?

I don’t actually know if this is an option so any help or advice would be appreciated.

OP posts:
anon2022anon · 13/07/2023 16:02

It is an option to keep but incurs costs, and the question is whether you want to be a landlord in this current period of time. I do it, but there are huge swathes of smaller landlords leaving the profession.

In order to keep my property, I moved out and into rented for a year, and found a tenant. I got consent to let on my residential mortgage and kept that status quo for a year, to establish a rental history.
When my residential rate was up, I moved to a buy to let mortgage, and remortgaged from my 40-50% LTV at the time, up to the maximum of 75%, and released the rest as equity. I then went house hunting with my partner, and used that equity as my deposit.
Its a lot harder to do if you are not doing the renting in the middle, as you have no proof as to what the rent you could bring in is, or if you could find a tenant, so a mortgage advisor told me that certain lenders ask for you to be stress tested as if you have both mortgages coming out of your bank for both properties.

You should check out the stamp duty costs, as you will own 2 properties, so will more than likely have a large bill to pay on your new home, which won't be incurred if you sell the house. This could easily be as large as the equity you release if you live in a low value area.

All in all, would I do it now? In my specific circumstances yes, but most other circumstances, no. I needed to move out of the area quicker than it would have been to find a house, go through the mortgage hoops and buy it, and then rent out the house. I'm now considering selling as the future is not looking great for landlords, and I could get similar growth/ return currently with a savings account.

andymary · 13/07/2023 16:08

The biggest question for me would be if your affordability/income/outgoings (on paper) is enough to be able to be eligible for two mortgages simultaneously.

Robertskimberly · 29/04/2024 16:24

In your situation, both selling and releasing equity have their pros and cons. Selling your flat outright would give you a lump sum for a deposit, but you'd lose ownership of the property. On the other hand, remortgaging to release equity allows you to keep your flat and potentially earn rental income, but it comes with added mortgage costs and risks of being a landlord. If you're leaning towards renting out your current flat, it's worth exploring the option with a mortgage advisor to see if it's feasible. They can help you understand the financial implications and whether it aligns with your long-term goals. Also, consider checking out cash house buyers as an alternative option.

https://www.thepropertybuyingcompany.co.uk/cash-house-buyers/

NewFriendlyLadybird · 30/04/2024 08:40

It’s an option, though I have to say that we accepted an offer from people who were planning to do this, only for them to pull out once they’d properly done their sums and realised that it was not actually affordable. I did question the plan from the start, but the EA assured me it was fine, and the buyers were very full of what a strong position they were in. Suffice to say I would take quite a lot of persuading to accept an offer from people in the same position again.

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