New EICR to cover any changes made by outgoing tenant?10:00 AM, 4th May 2021
About A week ago 76
I have a tricky property decision to make and would very much appreciate some advice. I have a central London flat, unencumbered by any mortgage, currently valued at £675,000. My husband and I currently have 1 salary of £50,000, and hope to have 2 salaries at about this level soon. We are looking to buy a family house somewhere slightly less central, at about £850,000.
We can do this 2 ways; 1) we sell the flat and buy, or 2) we move out of our flat into cheap rented accommodation, rent the flat at £2,700 pcm, and then get 2 mortgages, one on the London flat at 70%ltv, and another on the new house at about 50%ltv. With option 1) we would be leveraged at about 35% on one property. With option 2 we would be about 80% leveraged on the 2 properties, and so of course much more exposed to interest rate increases, but we would have the 2 properties. The flat is not a perfect BTL investment, but it is not bad, at about 4.2% yield. The major attraction of keeping the flat is the amount of investment going into the area at the moment, which is transforming the area and will mean a steep capital appreciation.
We could probably cover both mortgage payments with the rent from the flat, depending on what combination of interest only, repayment etc we went for (we have had several different offers). If we sold the flat, I doubt we would ever get back into the central London property market, but we would have much less personal debt and exposure, and could probably buy a bigger family house, too – which in turn, would appreciate in capital value faster than the flat.
I am concerned to make secure investments for the long term, as we hope to start a family soon. I think now is a good time of our lives to work hard and take on debt, in order to keep the London flat as a long term investment, and have our ‘eggs’ in 2 baskets rather than one. But my husband thinks we should take the less risky option of selling the flat to buy the house, taking on much less debt. He argues that that route could also leave us the chance to remortgage our house and buy a straight BTL investment elsewhere.
Many thanks in advance
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