I have a mortgaged property in the UK where my family live. I still owe the bank about 80k on this property, which I repay at the rate of about 8k per year. The interest rate on this loan is about 5%. I have no other debts.
I would like to sell my mortgaged house and move to a larger property, but I would prefer not to take on additional debt to do so. The house I live in is ought to sell for around 375k. The properties I am looking at as possible purchases are in the 400-450k range.
I am fortunate enough to also own a small flat which is rented out and provides an additional income of about 8k per year after expenses for repairs etc. I own this flat outright - it is not mortgaged and has a value of roughly 130k.
There are legal fees, costs and other attendant expenses when buying and selling property in the UK. They will amount to several thousand pounds. I have the liquid assets to cover these.
If I want to move without borrowing additional money, I could sell the flat, pay off my mortgage and then use the remainder to fund the move. However, that would deprive me of the rental income from the property. Since the mortgage payments are essentially the same as that rental income, I would be no better off in terms of monthly income, but I'd have lost a significant chunk of potential retirement income.
Might I be better off keeping the flat and borrowing more money on the mortgage? How do I calculate my best course of action here?
Edit (taken from info in comment):
By way of explanation for that awful 5% rate is due to it being a very long term fixed-rate mortgage. It is due to end very soon, so I'll be shopping for a better deal as part of the move, if I choose not to pay it off.