Buying a house in London

[Karlito]

I puschased a 1 bedroom flat in my 20’s for £150,000 which is currently worth approximately £250,000 now, with £170,000 in equity.
I met the woman of my dreams and started a family, we decided to temporarily move into a relative’s house due to space and rent the flat out (currently £1150 pcm).

5 years later, we are still here and now have 3 young children, she is a full time mum but we can’t stay here forever.

My income fluctuates at around £40,000 per year being self employed in London.
It’s a physically demanding job and I’m 40 years old, I don’t have a retirement plan and limited to the number of years I can work until due to health issues.
I would like to keep the rental property as my pension.

I am also lucky enough to have saved around £100,000 in savings.

I’ve seen a 4 bedroom house for £500,000 but I still don’t think I can afford to live there.

I’ve been thinking I should remortgage my rental and get a second buy to let mortgage (if I am even able to) on this property and rent it out until my equity position is good enough to comfortably afford to move in there with my family.

Or should I sell my rental flat, pay the CGT and try save some stamp duty cost as this will now be the only house I own, although it’ll be a BTL for at least 2 years due to the kids school commitments.
I’m not sure which rate of stamp duty I’ll be charged.
I’m even more afraid of what house prices will look like in the future.

Can someone give me advice or other suggestions?

Thank you

[Gerry557]

Just to confirm, you are thinking of a second BTL on the 500k house you want to eventually move into.

You don't say how much the relatives house costs to live there, if anything.

Assuming 100k deposit will you get a loan for the other 400k?? X5 gives 200k on 40k earning. You might get a bit more from BTL income.

Does mum have future earning prospects and what timescale.

[monabri]

Woah! Serious issues here!

If you keep your first house rented out and buy the 500k house.

1.Stamp duty =£27500.

2. When/if you sell the 1st house you most likely will have a large capital gains tax bill!

You bought your first house for £150k and let's say you eventually sell for £250k...a £100k gain. Unfortunately., as you have not been resident in said property ( renting it out) you will be liable to CGT on a sliding scale. You can possibly mitigate some of the tax ( subject of further discussion)

It gets worse....capital gains will be charged at a rate dependent taking your income into account...at £40k your income on sale of said property will be £40k salary plus your capital gain on the house sale thus tipping the CGT tax into the 38% band.

[vand]

London property is expensive, with current mortgage rates exceeding the yield such properties can command in most cases - meaning they're not a great place to put your money regardless if you are talking about living there or investing there.

I was going to try to do a breakdown, but then I just considered the income/price ratio and saving the bother - there is NO WAY you should be considering buying a house 12 times your income.

[genou]

I puschased a 1 bedroom flat in my 20’s for £150,000 which is currently worth approximately £250,000 now, with £170,000 in equity.
...
5 years later, we are still here ...

How long did you live in the flat? Any gain is apportioned in months, with all the months you lived there CGT free, and the last 9 months are added on as tax free in addition. It may help a bit, if you decide to realise the flat.