I own my own home but rent it out because I cant afford to live in it should i sell up or stay on the ladder?

I dont think I will be able to afford to live in the house for a couple of years but I am renting the property out at the moment and this is going well. if i got the asking price for the property it would give me about 27k equity in the property to re-invest somewhere. the rent does cover an interest only mortgage but not the full repayment mortgage at the moment i need to add about 150 to it each months and that is perfectly ok. If i sold up I could afford to save about 4k a year and on 27k i could easy get about 1500 interest. i guess the question is will house prices rise by more than what i can save. what do you guys think. in the last year the avearage increase in house prices near my property are about 7%

i cant downsize as its already a first time buyer home and i bought it for 91k and have a 78k mortgage. similar houses are going for 105K now. i live in the southeast near norwich but i only earn 25500 and it isnt really enought to live comfortablely with (i have high travel costs)

stay u have nothing to lose

I would keep on renting it out - as at least then you do have a foot on the ladder and if you did sell and you got the 拢27k this isn't gonna be about to get you back into it x

p.s I apologise for my spelling/grammer have just got up lol

What don;t you sell the house and buy something that you can afford to live in, you can re-sell once your finance has improve.

Probably best to stay on the ladder.
Would a better option be to downsize?

It does depend where your property is, take a look at what the market is doing and take a view from there. Analysts are forecasting a growth of between 5%-8% this year but they do this as the whole country and this is largely driven by London and SE where there is currently a shortage of property. If I was you I would try and hold on to the property and stick with your interest only as you will get capital growth, how much does depend on weterh your area has peaked or there is still room for growth.

Don't take too much notice of these property experts who say prices are going up by x% - this is a national average and not typical of the whole country. By us, for example, prices have been steady for a few years, maybe even gone down a little.
I would suggest you stay as you are for a couple of years and re-assess the situation.
If you really want to sell the house, then consider buying something smaller/cheaper instead.
I would also recommend a chat with an independent mortgage adviser who could go over all the options for you.

Only sell if you are going to re-invest (in Property) straight away. Historically housing increases at a far better rate than bank savings. Also you have to pay tax on the bank savings whereas profit on the property is tax free so long as you don't have more that one property at a time and you don't keep moving as a regular habit.

Im in exactly the same situation as you, I couldn't even afford the furniture so I too, rented it out. Property prices have shot up so much Im glad I bought early and will definately keep my house.

why not downsize and rent again.this will still give an income and reelease some capital which you could reinvest.also the new property will increase in value

stay on the property ladder else you will never get it back,, you've seen how prices have moved in the last ten years, what will it be like in another ten years

Steve,

I'm a financial advisor and do these calculations, I'd say about 4 times a day, 20 times a week, approx.1000 times a year, and have done for 9 years.

May I just say the following:

You live out of London, and in my experience, the housing market trends (generally) seem to have their epicentre in London. These trends ripple out over time. It may be possible then to roughly deduce that your area may reflect what happened in the market in London some months ago. Perhaps say 6 months. London has continued to increase (as verified by the Halifax website below). Even a quarterly change recently was 6%. I would hazard a guess from this that your area still has reasonable growth to come.

Thats the first thing.

The second thing is that you are currently harnessing the amazing power of leverage by holding on to the property.

You are quite right in that you would achieve 5.5% growth on the 拢27000 that you might invest after selling (in the bank). However, you will be taxed on that (if you are saying that is a net figure please let me know of the rate and the bank as I would appreciate it). Your net return is more likely to be 4.29% which would make you 1158.30 over the 1st year.

To add insult to injury, you have assumed that your sale would make you a clean 拢27000!! I hesitate to say it would not. You would have at least 2% selling agents fee, and then there would be solicitors costs on top. Perhaps 拢400 if you were lucky (including VAT). You are looking at 拢2500 at the least to dispose of that asset, and then you have a tax liability on the growth of the property over the time you did not reside in it. (this could probably be mitigated with wear and tear allowances, and perhaps any improvements or costs you had during their tennancy). So lets say you end up with 拢24500, at 4.29%, then you are looking at 拢1051 over the year. YES ITS GOING DOWN ALL THE TIME!

You have also not mentioned whether or not you have any penalties on your existing mortgage. There will inevitably some sort of fee (even if only an admin fee) for releasing the deeds. Sometimes on ly 拢150 or 拢200. If you are still committed to the bank on an introductory rate deal (ie fixed rate or discount rate) then you may find your final amount is reduced more by having to pay the penalty to break that deal. Thus leaving you with less to invest and consequently less yearly return.

By keeping your property, you are using MAINLY the banks money (and less of your own) to allow you to get "gearing" or leverage, and thus expose a lot more capital to the market (the risk is in the direction of the market, which we have done some rough research on already).

Therefore, lets assume now that you only get 4.29% growth in the property market in your area, over the next year, the point is, that you would be getting 4.29% growth on the full value (around 拢105000 I think you mentioned in your additional details). This equates to 拢4504.50 over the same year that you would have it in the bank. Now lets say that you just apply the 20% Capital Gains Tax that you would pay in your income situation, then that would still leave you 拢3603.20 in equity in your asset. That is 342.8% greater return than you would get on your money from your suggested "selling" alternative.

This is of course just my perspective on things. However, should you wish to hear the rest of my answer and perhaps advice, I would say this.

1. Call up your lender and convert your mortgage payment to INTEREST ONLY. It can often be done at very little expense (usually less than 拢100), sometimes free.

2. Stop subsidising this mortgage to reduce your payment. Yes its a good idea to have no debt at all.....EVER but that comes a bit later in the plan. At the moment it is good debt, and working for you if the rent covers more than the interest only mortgage payment, and you will then have turned a Liability into an Asset (something that puts money in your pocket, rather than taking it out).
3. Take the residual profit on the rent, and the money you were previously paying to subsidising the mortgage, and put it into a bank and save for a deposit for yet another property. Alternatively, let it build up to 拢1000 or even 拢2000. In the meantime go down to your local library and read every single book you can find on stocks, shares, derivatives, options, spread betting, trading, trading strategies, and make notes on them all. Perhaps spend a little of the extra money you have on some new books, and perhaps even a course or seminar. Then, start to invest your money in different risk catagories within the PAPER ASSET world (stocks shares and spread betting etc - assets on paper). For instance, some into Long term Buy and Hold, some into medium term buy and hold, and some into momentum trading (much more exciting) Start using the dummy or demo trading programs that you can find) and start to get some confidence. Then slowly start to invest, learning as you go.

After a couple of years, you will very likely have more equity in your property, and more money in your investments.

Soon you will be in a position to put together a plan to upgrading your life style and moving into a house you would really like to live in.

Hope all this helps.

Richard