Should I sell my house or keep it as an investment?

Q I own a three-bedroom semi-detached house on an estate in Hinckley. It is worth £175,000 and my Isa mortgage is for £75,000. I have no extra expendable income.

I am looking to buy a £300,000 house with my boyfriend, who has £100,000 cash to invest. I would have the same if I were to sell my house. If I sell up I could effectively pay half of our £100,000 mortgage leaving me slightly better off at the end of the month, or alternatively rent my house out for approximately £525 per month.

I am aware that my house could be a great investment in the future, but am concerned that it could be an unaffordable financial burden if it does not rent. Are there agencies that guarantee rental income? If so, I assume they charge more and is this financial viable?

Looking at the situation I feel I should sell my home, whereas everyone else is telling me to keep it as an investment. I would welcome an expert point of view.
SW

A Yes there are letting agents who guarantee rental income, and yes they do charge more. But that's not really relevant - having looked at the figures, letting out your current home doesn't look like a sensible option.

First, to be able to raise the £100,000 cash you need to put towards the house you are buying with your boyfriend, you would need to increase the mortgage on your current home to £175,000 - that is 100% of its current value. Since the most you can usually borrow with a buy-to-let mortgage is 80% of the property's value, you won't find a lender willing to lend.

Second, even if you could find a willing lender, the estimated rental income of £525 falls well short of the £875 a month you would need to service a mortgage of £175,000, assuming an interest rate of 6%.


And, in fact, to qualify for a buy-to-let mortgage of £175,000, the rental income would need to be 125% of the monthly mortgage payment which works out at just about twice the rent you think you would get for your home.