PDA

View Full Version : pitfalls of letting out your home



lizzielamb
23-01-2008, 11:32 AM
I have a new job and want to let out my home. Any rent that I get will just cover my mortgage payments and I will not make any profit.
Do I have to get a buy to let mortgage? If I do not inform my mortgage lender will it invalidate my landlord's insurance and can the mortgage lender repossess the property because they have not been informed?
My friends who rent out their property have not switched to a buy to let morgage because the payments are too high.
I am not intending this to be a business I just want to pay my mortgage but the information I can gather on the internet seems to class all landlords as the same i.e people who buy to let as a business to make money and have several properties against someoen who just wants to let their home as like me they have a new job out of the area. it seems unfair.
an the government tax me on the profit of my home if i was to sell it and I had been renting it out?
Any advice is greatly welcome

jeffrey
23-01-2008, 11:51 AM
If you let without consent from mortgagee (lender), you are committing a serious breach of mortgage conditions. Mortgagee could even demand immediate repayment of entire debt- so why try to be 'clever' at such risk?

pcwilkins
23-01-2008, 12:36 PM
I have a new job and want to let out my home. Any rent that I get will just cover my mortgage payments and I will not make any profit.

If it's covering your mortgage payments and your mortgage is a repayment mortgage, you are making a profit and you will have to declare it to HMRC. Effectively, T is buying property from the bank and giving it to you; your profit is being used to reduce your debts.


Do I have to get a buy to let mortgage?

Check your mortgage's t+c's, but the answer is almost certainly yes. And if you do this your interest rate will probably rise and the rent may not cover it. In some cases lender may not be willing to grant a btl mortgage.


If I do not inform my mortgage lender will it invalidate my landlord's insurance

Not sure; maybe.


and can the mortgage lender repossess the property because they have not been informed?

Again, check mortgage t+c's, but not Jeffrey's post above.


My friends who rent out their property have not switched to a buy to let morgage because the payments are too high.

Oh, the poor dears. Maybe get some honest friends?

I have a friend who steals, but only to pay his bills*. Is it ok if I do that too?

(*Note: not really, it's just an example.)


I am not intending this to be a business I just want to pay my mortgage

Profit is profit, whether your intending it to be a business or not.


but the information I can gather on the internet seems to class all landlords as the same i.e people who buy to let as a business to make money and have several properties against someoen who just wants to let their home as like me they have a new job out of the area. it seems unfair.

You are letting your house out to pay off the mortgage. That is called making money. Sorry.


Can the government tax me on the profit of my home if i was to sell it and I had been renting it out?

CGT is complicated. Depends how long you rent it out for.

I suspect that if you rent it out for 3-5 years, there probably won't be any profit anyway, unless you bought it more than 10 years ago.


Any advice is greatly welcome

Not sure if mine will be but there you go.

Peter

jeffrey
23-01-2008, 12:59 PM
Why "not Jeffrey's post above", Peter?

TaxationPete
23-01-2008, 14:01 PM
Some, even main street Lenders allow the change of use at no change to the interest Rate. This is most comment where the move is job relateda dn not a long term deliberate business. Many agents now insist ot having visibility of written permission form Mortgage providers or a genuine B2L mortgage. Also you buildings insurer has to give permission or you have to change to a LL Insurance. HMRC should be notified to trigger a SA return to be sent to you at the appropriate time and you must declare the profit/loss each year. If there is a loss you declare it so it can be offset against gains in future letting years. Also if you blindly crash on without HMRC and declarations then you will not attract Letting Relief after the 36 month PPR exemption period. Read IR283 on the HMRC web site and many associated sheets on this subject. Regards Peter

alidee
23-01-2008, 15:01 PM
If you let without consent from mortgagee (lender), you are committing a serious breach of mortgage conditions. Mortgagee could even demand immediate repayment of entire debt- so why try to be 'clever' at such risk?

Jeffery is correct so yes definately NOT worth the risk .The lender can ask for the loan to be repaid in full which I guess means if you cannot repay it you MAY be repossessed. As always check with lender and get any agreement from them in writing.

Alidee

peterdo
23-01-2008, 20:29 PM
An additional point to consider. If you are planning on taking out another mortgage to purchase your own residence, your credit report will show another mortgage, therefore, the new lender would want to see details of income and proof tahts its a BTL as otherwise you would be likely to fall outwith affordability limits.

I must admit, it is tempting, however, the risk is too high. Most lenders will offer you consent to let without a requirement to send the AST unless requested, I think from memory, my mortgage went from 0.05% below base rate to 0.75% above base rate.

I was in the same situation, I am making a considerable loss on my property at the moment, however, I am in a catch 22, cant sell the property at present at the value I would like, if the property sat empty on the market I would have to cover an £800 mortgage, which wouldnt have allowed me to buy my own house where I now live.

Only you can decide, but make the decision based on all the facts, your friends may rent without a BTL mortgage, however, probably 95% of people on this forum do...

Pete

Surrey
23-01-2008, 21:17 PM
Why "not Jeffrey's post above", Peter?

I suspect someone left off the magic 'e' at the end of the word... ;)

pcwilkins
24-01-2008, 08:09 AM
I suspect someone left off the magic 'e' at the end of the word... ;)

Exactly right. Sorry, Jeffrey...my brain works faster than my fingers can type (but that's not saying much as I type slowly).

Peter

pcwilkins
24-01-2008, 08:14 AM
I am making a considerable loss on my property at the moment, however, I am in a catch 22, cant sell the property at present at the value I would like, if the property sat empty on the market I would have to cover an £800 mortgage, which wouldnt have allowed me to buy my own house where I now live.

Let me get this straight --- you're holding onto an investment which is costing you money to hold onto and which is decreasing in value? :eek:

This is terrifying!

Peter