Rent out flat vs sell when moving in with partner?
I’m planning to move in with my partner later this year. She owns her home mortgage-free, and I’d be contributing to bills and household expenses (instead of her having flatmates).
I’m trying to decide whether to rent out or sell my flat.
Current situation:
- Flat value: ~£232k (estimate from my mortgage provider’s app; bought for £220k in Aug 2023)
- Remaining mortgage: ~£174k (≈75% LTV)
- Rate: 5.39% fixed until Aug 2028
- Monthly payment: ~£1,000 (I currently overpay but I don't plan to overpay if I rent it)
- Salary: ~£76k (so 42% Scottish higher rate)
Rental estimate according to letting agent:
Rent: £1,250–£1,300 (say £1,275)
Letting agent: 8% (they gave a good deal I think)
Factor: ~£200/month
Other costs (~£200–300/year): gas safety, PAT, legionella, smoke alarm checks, etc.
Rough numbers
Annual rent:
~£15,300
After agent:
~£14,076
After factor + other costs:
~£11,400
Mortgage:
~£12,000/year
Final before tax: –£50/month
Taxable profit after dedicating all expenses except mortgage:
~£11,400
Tax at 42%:
~£4,800
Mortgage interest (est.): ~£9,400 → 20% credit = ~£1,880
Tax due: ~£2,900 per year
Final position: ~–£250/month after tax
How I’m thinking about it is that I’d be paying ~£250/month to keep the flat, but I’d no longer be paying £1,000/month to live there. I keep the asset, tenant covers most of the mortgage, and there’s potential long-term appreciation.
Questions
* Do these numbers (especially tax) look right?
* Am I missing anything important?
* Would you keep and rent, or sell and release ~£50k equity? I realize I can gradually put that into S&S ISA and not have to worry about tax.
* Would switching to interest-only BTL materially improve this?
Thanks! appreciate any input!