33% equity in home - what should i do?
Discussion
Due to changes in life and work (long term missus and work location changes) I'd like to move home.
The issue I have is that the area I live in is still being built, so more apartmnets are being built. I get the feeling that selling it would be difficult, but renting would be fairly easy. After all, why buy a secondhand property when there is a brand new one being built next to it
As in the subject title, I have about 1/3 of the homes value as equity, which was put in when I bought the property.
With the risk of being flamed, I've considered 'shifting' some of the equity out of the apartment, renting out the apartment to a managed service, and using the released equity to put down on a deposit on another property.
Am i being stupid and naive here, or should I sell up? After scanning the net house prices, property value in the area are stabilising, but I am not an expert in this
The issue I have is that the area I live in is still being built, so more apartmnets are being built. I get the feeling that selling it would be difficult, but renting would be fairly easy. After all, why buy a secondhand property when there is a brand new one being built next to it
As in the subject title, I have about 1/3 of the homes value as equity, which was put in when I bought the property.
With the risk of being flamed, I've considered 'shifting' some of the equity out of the apartment, renting out the apartment to a managed service, and using the released equity to put down on a deposit on another property.
Am i being stupid and naive here, or should I sell up? After scanning the net house prices, property value in the area are stabilising, but I am not an expert in this
Without being patronising it comes down to the numbers really. If you are going to rent your current house out then you are going to have to move to a Buy To Let Mortgage which is likely to have a higher deposit requirement and will also require the likely market rent to be at a certain level relative to the mortgage payments (usually around 120% of the mortgage payment) I think). If you can satisfy these criteria then it is probably a good idea, especially if as it sounds you may struggle to find a buyer willing to pay what you think the house if worth.
The other thing to consider if whether you really want to massively increase your level of indebtedness, even if the rent more than covers the mortgage you will still have months where ther house will be empty and there are always those annoying bills to pay when washing machines break, the roof needs fixing or the place needs painting.
Also, don't forget that you will need to let HMRC know of your new income, and any profit you make on the BTL will be taxable, possibly at a higher rate depending on your circumstances.
The other thing to consider if whether you really want to massively increase your level of indebtedness, even if the rent more than covers the mortgage you will still have months where ther house will be empty and there are always those annoying bills to pay when washing machines break, the roof needs fixing or the place needs painting.
Also, don't forget that you will need to let HMRC know of your new income, and any profit you make on the BTL will be taxable, possibly at a higher rate depending on your circumstances.
[quote=devnull]With the risk of being flamed, I've considered 'shifting' some of the equity out of the apartment, renting out the apartment to a managed service, and using the released equity to put down on a deposit on another property.{/quote]
You can get to 80% LTV on a BTL mortgage, but you will hate the rates and fees.
You can also get Permission to let from some resi lenders, it all depends which lender you have your current mortgage with and whether they will let you raise funds out of the property as well.
You need to take into account the rental income, and also take into account the possiblity of void periods, where your current flat may be empty. You still have to pay the mortgage.
You can get to 80% LTV on a BTL mortgage, but you will hate the rates and fees.
You can also get Permission to let from some resi lenders, it all depends which lender you have your current mortgage with and whether they will let you raise funds out of the property as well.
You need to take into account the rental income, and also take into account the possiblity of void periods, where your current flat may be empty. You still have to pay the mortgage.
Eric Mc said:
Don't forget that you can rent out the apartment and then, if you sell it within three years of moving out, you won't pat any capital gains tax on any gains you might make.
Even if its more than 3 years, he would have the £40k lettings exemption to cover any remaining chargeable gain so long as he used it as his "principle private rersidence" at some point before renting.David
sumo69 said:
Eric Mc said:
Don't forget that you can rent out the apartment and then, if you sell it within three years of moving out, you won't pat any capital gains tax on any gains you might make.
Even if its more than 3 years, he would have the £40k lettings exemption to cover any remaining chargeable gain so long as he used it as his "principle private rersidence" at some point before renting.David
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