Sell a property vs taking a mortgage

Calculate your debt to income ratio after the new mortgage. If it's too high, you shouldn't take any extra mortgage.

How do you know what is too high? In my case, I'm young and have a rather high income from my job in the software industry. I'm comfortable with approximately twice my annual income minus taxes as loan.

For someone who has an average income as opposed to a high income, this might not apply and the total loan amount should be as low as half of that, i.e. the annual income minus taxes. The reason is that someone with a rather high income has a lot of freedom deciding how to use that money, whereas for someone having an average income the necessary living costs will be the same so the freedom to dispatch large amounts of money into paying a loan might not be as big.

Also age has a lot of influence on the acceptable loan amount. I wouldn't recommend twice the annual income minus taxes as loan for someone who has only half of the career ahead and half of the career behind. For me, about 85% of my career is still ahead of me so I can have as high loan as twice my annual income minus taxes. There's a lot of time to pay the loans.

Also taking a loan is only useful if its margin is low. My loans have 1.3% average margin. This means in a 1.67% interest rate environment, I would pay 2.97% as interest for the loans. I don't know where you live but 5% total interest rate sounds way too high for most developed markets. For example the United States 10-year treasury rate is 1.67% so if the margin is 1.3% you would be paying 2.97% for a 10-year fixed interest rate. 5% is so high that perhaps it's the bank's way of telling you that you have way too much loan and that you are a high-risk customer.