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For work reasons I have to relocate. I currently own (it's been just over a year) a house for which I am paying a mortgage.

I'd like to make something good of this purchase so I was wondering if waiting for a better time to sell is worth it or the interest I'd be paying would outdo the gain.

NOTE: there is lot of renovation works in the town and a big shopping mall should be built in a couple of years. Also the price of properties in the UK is on the rise (in the order of 15k per year). This makes me think the value of my property will also raise.

FURTHER UPDATE: since it seems relevant, I live in the South East of UK (Kent) and my current rate is 2%. I currently pay around £8000 a year in mortgage. How higher should the price go to compensate that?

algiogia
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4 Answers4

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You are making an assumption that the house will appreciate in the short term, which there is no way you can know. You will probably take a bath financially selling a house after one year into a mortgage even if you sell it for what you paid for it.

If there is any chance you might relocate back it is definitely worth keeping it, otherwise I'd say cut your losses. The only upside might be if you could rent it out, keeping in mind that you generally need to rent for about double your mortgage payment to get positive cash flow. Letting it sit empty while you wait for it to appreciate is undoubtedly going to cost you big-time.

JohnFx
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Usually, sell.

Every month -- arguably every day -- you own the house it is costing you money for mortgage and taxes and upkeep. Unless it is also producing income, or you are actually living in it, that is a serious problem. In any sane market, it is extremely unlikely that the house can gain enough value to offset that loss.

Renting it out, even if you lose money versus the costs, would at least slow the bleeding... But unless you actually want to deal with rental, or strongly expect to return very soon, selling rapidly for a good price is usually optimal.

Of course when setting the asking price, and negotiating offers, you are going to have to consider exactly this trade-off.

NL - SE listen to your users
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keshlam
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You are weighting a certain cost of the mortgage interest versus the possible gain of the value of the house.

Take the interest you pay per month and divide it by the current value of the house. Say your interest is 3% of the value of the house (may be more or less depending on the balance owed and the interest rate of your mortgage).

Say the average appreciation in your area is also 3%. But that means that there's only a 50% chance that the actual appreciation will be more than that (assuming the odds are equal either way), and there's a 50% change that you'll be worse off.

Generally, trading a risk-free loss for a risky gain of equal size is not a good investment; you generally can find better average returns on risky investments, so your best bet is to sell now and pay of the mortgage.

D Stanley
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It depends where you are going to live and how you are going to pay for your new accommodation. If you are moving within the UK and intend to buy another house you run into the problem that you will find it hard to get a second mortgage. If you rent out the house in Kent you will probably have to change the mortgage basis on it to a mortgage that allows for letting - normal residential mortgages exclude that entirely - which would allow you to take out a residential mortgage.

It depends how much equity you have in the house. If most of the value of the house is mortgaged then you'll (1) find it hard to re mortgage on a commercial mortgage (2) may find it hard to cover the costs by letting and (3) are very sensitive to house prices falling.

Also bear in mind that for the past three months in a row, house prices in the UK have mostly either stagnated or fallen... so you cannot guarantee any increase in value of the house in Kent.

What I'm saying is ... there is no crystal ball that will tell you what's financially the best thing to do. Talk to estate agents, find out how much the house would sell for / how much it would rent for. Talk to your mortgage lender and find out if they will let you rent it out. Talk to other mortgage lenders and find out how much a commercial mortgage would cost. Do the sums, find out if renting the house would cover the costs, in which case you can gamble on the housing market continuing to rise. Don't rely on house prices continuing to rise as they have done before. Certainly where I live due to the number of new houses being built and other economic issues house prices have fallen appreciably over the past few months and may well continue to fall as more and more new houses come on the market.

matt
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