Pros Cons Exiting Mortgage To Rent

[keepthefaith]

Hi there....Just looking for some opinions about what the pros and cons would be of selling existing house and renting for a year or two.

My Situation:-
Mortgage of €230K (approx €1200 per month)
House value circa €340K but prob do well to sell for €325K
43years of age, married with one income........

My simplistic thoughts:-
Sell for approx €325K
Clear mortgage and have approx €90K invested for a year or two
Monthly rent approx €900 in my area - so €300 per month better off compared to mortgage situation.
No longer exposed to risk of further mortgage interest rates rises - this is a real concern for me.

I know this is a very open question with lots of ifs, buts and maybes..........but would really appreciate some opinions on this as it's an option I'm really considering

 

[lazing]

- Your concern about interest rate rises can be mitigated by fixing. Rental costs can also rise, and it is unusal to fix the rent for more than a year, or tending toward three at the most, whereas you can fix interest rates for longer terms.

- Is it worth considering being in the rental market indefinitely. Why the one to two year time frame? If you plan to buy again in two years, you need to really consider your logic and assumptions, and what happens if they are not right.

- If you do sell be very careful with your 90k. To me this is savings, not investment money. Yes put it in to a secure deposit account, but my advice is not to put it into any form of investment that carries risk.

My own personal approach is:
- Property prices are fluctuating massively currently (all downwards, unfortunately!), but this only matters to those who need to sell.
- Interest rates are also volatile (all upwards, unfortunately!), but this will ultimately have an impact on the rental market also. There is a cost to living somewhere, and this fluctuates.
- Your 1200 per month is made up of capital and interest payments. Taking a glass half-empty perspective, there is a worst-case floor on what your property is ultimately going to sell for. Once your mortgage amount owing passes below that threshold, you capital repayments are secure, and are effectively long term savings. In the case of rentaly, the rent will never contribute to long term savings.
- Taking a glass half-full perspective, it's likely that well located property prices will not collapse that much lower (already 50% reductions from peak). Your mortgage repayments will mean that you will have more equity in your home over time than if you decided to cash in now.

 

[keepthefaith]

Thanks for your view lazing.....much appreciated.

I suppose the one to two year time frame is self-imposed but I wouldn't be averse to renting for a longer period. I suppose my reasoning is to to try and rent through this period of uncertainty.

In addition we would also ideally like to move/build elsewhere eventually.....so sitting on some money on deposit rather than servicing a mortgage with reducing property values appears more attractive at present.

However at present my main concern is the impact interest rates rises may have on our monthly disposable income leaving us struggling month on month.

Agree with you regarding secure deposit versus investment....safety first there.