So in order to move into our new home we needed 2 mortgages, the buy to let mortgage cost us £5000 (what a rip off) and was a whopping 4.70% tracker - remember the Bank of England base rate is 0.5% (what a joke.) Technically we were "letting to buy" not "buying to let" but the administration charge was still an extortionate £5000. The second mortgage for our new home was a much more reasonable 2.70% tracker. We could afford the repayments quite comfortably but had credit card debt and a family loan to pay off. If interest rates went up by 1% then things would get tight, if they go up by 2 % we will be badly struggling, if they go up by 3% we will have to abandon ship.
We convinced ourselves that even if we gave it a year and things got difficult then at least we could sell the buy to let and put some more money into our new home to reduce our monthly outgoings. For this though we needed house prices to at least remain stable or we would lose all of our equity in the rented property. There would also be a £5000 penalty to pay so it would be an expensive experiment.
In December 2009 I read that most people surveyed thought that house prices would continue to rise for a while yet and the media were saying that interest rates would stay at 0.5% at least until late 2010.
So we decided to risk it. It was the only way to secure our dream home and if house prices rose gently then it could end up being a good investment for the future.
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