Remortgage or to Sell?

[FUBU05]

Hi guys,

first post on the forum and was hoping for some advice.

To cut a long story short.

I own a flat that has a remaining mortgage of £155,000 and an asking price of £260,000. Based of recent purchases in my area i am confident it would sell at this price.

Ive recently had an offer on a property accepted for around
£470,000.

I have 2 options:

1. Remortgage my existing property and take around £35,000 out as equity to help aide the deposit on the new property. If i clear the majority of my savings account out (approx £60k) and add this equity from the remortgage to it, i will have enough for a decent deposit as well as other fees related to the new property. I would still have around £15k in my savings account after. I should also be able to make around £300 a month off rent for the existing property but would look to plow this back into the property as on a Let to Buy mortgage it, would only be on interest only.


2. Sell the existing property and use the £100k approx to put down as a deposit on property number 2. This allows me not to touch any of the savings in my bank and reduce my mortgage by a bit on property number 2.


I am a little confused of which option to take. Both properties are in London but with all the talk of the London House market having peaked, i am a little confused with what to do. A lot of cash in the bank is nice as security but at the moment cash in the bank is making me nothing. investing it in bricks and mortar long term seems the right thing to do but is this the right time to cash out on property 1, buy property 2 whilst holding savings in the bank?


Your thoughts and advice would be much appreciated.

 

[FUBU05]

Hi guys,

Any feedback or advice anyone can provide on this would be greatly appreciated. Quite a significant decision to make and having other opinions could certainly help aide the decision making process.

 

[Jacks & Jones]

Hi, Stressful time for you but good to have options! - As an estate agent i would advise you to keep as much money in "Bricks and mortar" as possible. Market may have peaked but as a long term investment no better place to have your money. I saw an interesting stat the other day, Rightmove expect property prices to rise by 30% by 2019 - Not a bad savings plan if this does happen! - as long as you do not stretch yourself too much have the two properties!

 

[Barny]

Hello FUBU05, not sure if you've given up on hoping to receive a reply to this or not, but despite being 3 weeks old, I thought I'd give you my 2p worth!

Personally, if I was in a similar and assuming the 35k available through re-mortgaging to just below the 75% LTV of your £260k value, I'd do this and use the £35k towards the deposit of your new property.

Also, if you're right with the £300 figure being 'extra' each month, I'd suggest keeping £50 per month as a contingency in case of unforeseen maintenance (£600/year) and put £250 in as overpayments on your BTL mortgage. Without knowing your exact mortgage deal, term and %, £250/month is £3000 a year extra off your capital so in 5 years time, assuming property prices stay the same or increase (which realistically they should do one of!),in 5 years you could then remortgage and pull out the £15k from overpayments, plus the extra equity through any property increase so possibly £20k, and this all towards your residential mortgage or reinvest that £20k on another BTL property and keep the same cycle so every 3-5 years you remortgage and use the equity elsewhere.

I expect there will be a calculator or excel spreadsheet somewhere where you could put in the various figures and see what would be more financially beneficial but would expect with a steady increase in property value, keeping a BTL property will be more rewarding long term.

Good luck with it all though!