Leeroy Posted November 4, 2010 Share Posted November 4, 2010 I wonder if anyone here can offer advice... We have our house on the market at the moment and are feeling a little pressured to try to sell quickly (ie lower the price) due to the impending doom of the fabled 'double dip' which seems to be showing signs of happening already. Is it worth hanging onto the house and renting it out (on separate mortgage? Interest only?) and taking another mortgage for the new house? Can anyone advise on our options for mortgage types / interest rates / deposit percentages please? I'm aware that if we do rent our current house out it'd be a medium to long term solution. All advice gratefully received Leeroy... Quote Link to comment Share on other sites More sharing options...
Stew Posted November 4, 2010 Share Posted November 4, 2010 Sarnie is your man. He's not as stupid as he appears! Quote Link to comment Share on other sites More sharing options...
Tarmac@TarmacSportz Posted November 4, 2010 Share Posted November 4, 2010 The rental market is through the roof at the moment so you shouldnt have any problems renting it. I have a house I rent out and im going to be putting the rent up very soon. If you want two mortgages then you will have to convert your current one to a buy to let and I think you need around 20% or 25% equity in it, not sure of exact figures but as said Sarnie is your man. Quote Link to comment Share on other sites More sharing options...
Sarnie Posted November 4, 2010 Share Posted November 4, 2010 If you can keep your house and rent it out then do it, let someone else pay off your mortgage for you However, there are things that you will need to consider. The first one is; can you afford to pay two mortgages if you can't rent out the original property? If no, then its a very risky business. The second thing is; can you get a second mortgage? From a lenders point of view they will deduct the monthly mortgage payment from your income when assessing affordability. If what's left is not enough then they will decline you. However, if prove that it is self funding then it should be ok. Also, if you don't sell your property, do you have a deposit to put down on the new property? Legally speaking, your are supposed to inform the lender that you are renting out the property. They are within their rights to insist that you transfer to a BTL product meaning higher rates and most importantly, that you ensure that there is 25% equity in the property, if there isn't already. However, if you didn't inform them, they would never know, unless you started defaulting on the mortgage because the property was empty. Once it got to that stage, there would be no sympathy from the lender as you had breached your terms and conditions. if you need some specific figures, just let me know Quote Link to comment Share on other sites More sharing options...
Ricey Posted November 4, 2010 Share Posted November 4, 2010 Ok focussing on the pit falls and some worst case scenarios.....can you also afford the maintenance if anything breaks.... the boiler for example. Other considerations - Landlords insurance, epc certificate to be provided to tenant (i think) , boiler serviced annually by gas safe engineer and certificate provided, if you rent it to more than one tenant (eg students) it becomes a home in multiple occupancy (hmo) which has a tonne of nasties attached to it. Letting Agents will skim their cut off too. If you can't rent it you only get a certain period (6mths?) Before you personally are liable for council tax payments. If you tell the lender and fall behind with payments the lender can appoint law of property act (lpa) receivers who can assume control and collect the rent/flog the house for the best market price they can (which could be in the middle of the double dip?) Don't tell them and they find its empty and your behind with payments they can treat it as an abandonment and skip the whole repossession process. .....you may also get a great tenant and have no crap to deal with....personally unless your reasonably comfortable with the costs I think its a ball ache! Oh and fall into any financial difficulties yourself and the government will tell you to take a hike with help on your mortgage payments and your lender is less likely to be sympathetic (because you have 2 properties) Good luck but think carefully Quote Link to comment Share on other sites More sharing options...
Bockaaarck Posted November 4, 2010 Share Posted November 4, 2010 Leeroy, the suggestions offered seem reasonable and backed by experience and knowledge. No disrespect to any of the guys who've responded but if I were you I would make sure are legally protected by speaking to an IFA. That may give you a more solid platform to jump off from. As Sarnie and others have explained there's quite a lot to consider here. Renting out your current place may be a good solution and for some people it works well. However you also have to be aware of circumstances outside your own environment. If we do get a double dip, the Feds decision to pump $600 billion in to the US economy worries me a little, that may have a knock on here, we have signs of inflation already. Hopefully you will stay in employment but what if you don't? What if your tennants lose their jobs, or what if your property is unrented for a couple of months, will you be able to cover the costs? Don't forget you'll need to have some kind of repayment vehicle for that IO mortgage. I don't want to be a doom monger but these things need to be considered. If you're going to rent out you have to consider the competition in the local market, research in to your competition is the key. Also remember a house is only worth what someone will pay for it. If it's £300,000 this year what will it be next year....£400,000 or £200,000? With a reported 490,000 public sector job lossess coming in to effect over the next few years. With the delayed shock waves of the banking crisis still being felt across the world (Gold prices still rocketing, governments buying their own gilts etc) nothing is certain Research and professional advice is what I would suggest. Best of luck Quote Link to comment Share on other sites More sharing options...
Ricey Posted November 4, 2010 Share Posted November 4, 2010 I would make sure are legally protected by speaking to an IFA. .....and on that point make sure you use someone who you either trust or others can vouch for (like Sarnie)........times are hard and a fee is a fee to some IFA's. Quote Link to comment Share on other sites More sharing options...
Bockaaarck Posted November 4, 2010 Share Posted November 4, 2010 I would make sure are legally protected by speaking to an IFA. .....and on that point make sure you use someone who you either trust or others can vouch for (like Sarnie)........times are hard and a fee is a fee to some IFA's. Agreed Quote Link to comment Share on other sites More sharing options...
Sarnie Posted November 4, 2010 Share Posted November 4, 2010 I have PI cover don't worry Quote Link to comment Share on other sites More sharing options...
chippy Posted November 5, 2010 Share Posted November 5, 2010 You could always considering registering an offshore company, putting the property and mortgage into the name of that company, that way you wont be liable for any capital gains tax when you do eventually sell the property at a later date. Might not be worth it depending on the value of the property though? Quote Link to comment Share on other sites More sharing options...
Leeroy Posted November 5, 2010 Author Share Posted November 5, 2010 Awesome guys, thanks for the top advice If we do it we'll hand it over to letting agents, let them take mosty of the hassle. We're not fussed about making anything off the rent, so long as we break even. The financial side should be OK hopefully - my biggest fear is problem tenants, as I have friends who've had issues with them. I'll see how the sale goes and take it from there... Thanks for the offer to look at numbers Sarnie Quote Link to comment Share on other sites More sharing options...
Sarnie Posted November 5, 2010 Share Posted November 5, 2010 Don't forget, that you have to pay tax on anything you make above the monthly interest NOT the total monthly payment.................so breaking even (assuming your on a repayment mortgage) actually means you will have a tax liability...... Quote Link to comment Share on other sites More sharing options...
captain Posted November 5, 2010 Share Posted November 5, 2010 Sell everything and buy shares in XEL. Up 114% in last few weeks................. Some say 300% to go and then, hello Lambo. (PS - I haven't got PI. ) Quote Link to comment Share on other sites More sharing options...
Ricey Posted November 5, 2010 Share Posted November 5, 2010 Don't forget, that you have to pay tax on anything you make above the monthly interest NOT the total monthly payment.................so breaking even (assuming your on a repayment mortgage) actually means you will have a tax liability...... aye caramba! I didn't know that. Dirty evil tax grabbing Government!!! Quote Link to comment Share on other sites More sharing options...
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