Sell up or remortgage as a buy to let?

[motorbreath]

Hi all, after some advice regarding our current circumstances, I've done quite a bit of searching on PH to see if this has been covered before but didn't come up trumps...

My partner and myself purchased our home some 4 years back or so and gradually modernised it. After being on a repayment fixed mortgage for a couple of years I remortgaged to an interest only using some of the increase in value to get a better interest rate, with the view to sell up within the next 2 years, our current o/s mortgage is 156k with monthly interest only payments if £425 ish pm.

Now we are 2 years down the line we thought best to sell up so we can release the increase in value and move down country as we've always planned. The local estate agent came around gave us a valuation which we were quite surprised at (higher than we were expecting) so we put it on the market at 10k less than their valuation to enable a quick sale. Other estate agents came in around 30k less than their valuation.

3 months later and after quite a few viewings, the agent suggests we reduce the asking price, so another 10k came off... Still nothing, lots of viewings but no one biting.

A further 2 months on and the agent now wants us to reduce it a further 25k! So that is below the stamp duty threshold. To say I'm a little bit pi$$ed off with his actions is an understatement tbh, I do feel the high valuation was done on purpose to secure our custom and then string us along.

Anyway enough background info, the query I would like some advice with is this...

Do we bite the built carry on selling up for 250k, pay off some debt a wedding and have a holiday and enough for a reasonable deposit for the next purchase.

OR

Is there a way of renting the house out and releasing some equity at the same time so we can put a deposit down on our next purchase and do the above listed things, I think some where in the region of 80k would probably cover things.
Also Currently I'm only temping as I was under the impression we would be sold up by now, so left my job, but then got temp work just to pay bills until the house had gone. Therefore I assume if I try to obtain a new mortgage as a buy to let they wouldn't give it to us as my income is a lot less than when we first got our mortgage?

I've heard mixed things about BTL mortgages, such as some are no deposit needed, which I find hard to believe and the rental income needs to cover 125% of the mortgage payments... According to the letting agents around here we would be able to achieve on average rental income of £850pm.

Any thoughts from a fresh pair of eyes would be appreciated.

Any queries please do ask, many thanks :-)

[Sarnie]

I can't really comment on whether you should sell up or not but I can comment on the BTL situation.

First of all you will be limited as you are a First Time Landlord and also your employment status. You'll struggle to borrow more than 75% of your properties value, which if it is £250k will be £187.5k meaning that you would only come out with just over £30k.

Plus £187.5k, even on IO, is likely to be over your rental figure of £850 pm.

So, based on what you have posted, it wouldn't be possible.

[motorbreath]

I think from reading that, it's a sure thing that we'll have to sell up. The BTL idea was a good one but not achievable right now, I think I just needed to hear it from someone else.

Many thanks :-)