We are moving to Canada from the UK in the next 6 months. We fully own our present home which is located in a very desirable part of the town (schools nearby + good neighbourhood). We do not want to sell this property, just in case things do not work out and we return to the UK in few years. We are planning to give it on rent when we move.
Rental yield without mortgage interest (after tax and management charges) will be around 2%.
We have the option of re-mortgaging the house and release some equity for other investments. We will be renting a house at least for the first 1-2 years of our life in Ontario, Canada so we wont be able to shift the released equity to further real estate straight away. Plus, we anticipate sufficient cash from income in Canada to put down for a deposit there should we need to.
My question is: should we release the equity from UK property and invest in stocks?
We are a bit nervous for 2 reasons:
1. Interest rates (currently 2.5%) will go up soon in the UK so mortgages will become dearer (say 4 to 5%), we may not break even between the rental cash flow and the repayments of any new mortgage.
2. If we shift equity from real estate to stocks, we will have a huge change in our asset allocation: it will become lean on bricks and heavy on the market indices.
What do people think? Is it a good idea to remortgage and put in in the market?
Any thoughts are welcome.
(We are a family of 3 (aged 33 and 31, family income >£100k/yr) with what we consider as a reasonable retirement plan already in place for hanging our boots at 55.