Ok so it looks like we may rent out our property but it won't cover mortgage

papermoney

Our 2nd property has been on the market a while now. Just dropped it again in price but it does seem that around here the market has slowed completely. I can afford to sell it at about 3k less than what it is advertised at.
The only option (other than just handing my keys back to NR - I wish I could do this) is to rent it out. The rent will not cover the mortgage though and I will still have to find £400-£450 a month for the shortfall.
I'm not sure what else I can do. Selling the house at the price now still puts me in negative equilty but I can find the funds to make this up.
I think we have resigned ourselves to the fact that we have to rent but I don't know where to start.
Any ideas?
I have already looked at my mortgage T&Cs and know I will need writen confirmation from NR. I have already found tenants (rather they found me).
Where do I go from here?

terryw

papermoney wrote: »

Our 2nd property has been on the market a while now. Just dropped it again in price but it does seem that around here the market has slowed completely. I can afford to sell it at about 3k less than what it is advertised at.
The only option (other than just handing my keys back to NR - I wish I could do this) is to rent it out. The rent will not cover the mortgage though and I will still have to find £400-£450 a month for the shortfall.
I'm not sure what else I can do. Selling the house at the price now still puts me in negative equilty but I can find the funds to make this up.
I think we have resigned ourselves to the fact that we have to rent but I don't know where to start.
Any ideas?
I have already looked at my mortgage T&Cs and know I will need writen confirmation from NR. I have already found tenants (rather they found me).
Where do I go from here?

You must have the permission of the lender before you do anything.

Letting out just one property is fraught with danger. You MUST take up references, obtain guarantors and deposit. Probably best to use an agent who knows the job for the first property. There are so many pitfalls for a new landlord that you could so easily make a mistake of immense proportion.

the poster formerly known as
terryw

papermoney

I have spoken to my mortgage company who are going to get back to me as they have said (just got off the phone) that the % may be increased due to the risk of non payment.
I'd love to use an agent but I can't afford to. The cheapest one round here charge 10% of the monthly rental charge plus VAT. However, I do have an appt with them next week to discuss what they do for their fee.
I know their experience would be invaluable however, it comes down to affordability. I know a costly mistake would be more expensive and it is a risk.

terryw

papermoney wrote: »

I have spoken to my mortgage company who are going to get back to me as they have said (just got off the phone) that the % may be increased due to the risk of non payment.
I'd love to use an agent but I can't afford to. The cheapest one round here charge 10% of the monthly rental charge plus VAT. However, I do have an appt with them next week to discuss what they do for their fee.
I know their experience would be invaluable however, it comes down to affordability. I know a costly mistake would be more expensive and it is a risk.

You really are taking a big risk here. If you are going to do it yourself, ensure that your tenancy agreement is as watertight as possible, put the deposit into one of the schemes, prepare a full inventory and photographs at the commencement.

Best of British

the poster formerly known as
terryw

moneysavinmonkey

papermoney wrote: »

I have spoken to my mortgage company who are going to get back to me as they have said (just got off the phone) that the % may be increased due to the risk of non payment.
I'd love to use an agent but I can't afford to. The cheapest one round here charge 10% of the monthly rental charge plus VAT. However, I do have an appt with them next week to discuss what they do for their fee.
I know their experience would be invaluable however, it comes down to affordability. I know a costly mistake would be more expensive and it is a risk.

If you have never rented property before at least get yourself an up to date book (my library has 4!) and browse these forums extensively. There is a lot that can go wrong.. you need to know what you are doing - the fact that your 'tenants found you' is ringing alarm bells for a start!

Definitely join a landlord association as well - invaluable just for legal help-line but have access to all forms - tenancy agreements, inventory, advice on deposit schemes + prescribed information, discounts on insurance, tax advice etc.

is NR northern rock? They has been a couple of posters recently refused permission to let from them so I hope you get that bit at least!

Rabiddog_2

If you rent out and STILL have to pay out £450pm to cover the mortgage, not including fees insurance extras then within a year you will have lost even more money than your reduced selling price? If you reduce the price by 10% or so then surely you will get more viewings and a quicker sale. At least that way there is an end in sight to your troubles. How long can you afford to prop up the mortgage by £500 per month ? 3 years, seven years? and will the house be worth more or less by then?
Its the difference between a sizeable loss and a bottomless pit.

papermoney

Thanks - It is Northern Rock. They are ringing me back. The tenants found us through word of mouth - my OHs stepmum knows the couple who mentioned that we may be renting. So they passed their number to us.
I won't be doing anything about them until I have full facts. As i've said i'm still going to see the agency and waiting for NR to ring.
I need to be 100% sure in my own mind first before doing anything.

terryw

Rabiddog wrote: »

If you rent out and STILL have to pay out £450pm to cover the mortgage, not including fees insurance extras then within a year you will have lost even more money than your reduced selling price? If you reduce the price by 10% or so then surely you will get more viewings and a quicker sale. At least that way there is an end in sight to your troubles. How long can you afford to prop up the mortgage by £500 per month ? 3 years, seven years? and will the house be worth more or less by then?
Its the difference between a sizeable loss and a bottomless pit.

Very well put.

the poster formerly known as
terryw

poppysarah

You need to sell it. You will need to save some money to payback the shortfall or borrow it. But selling is the only option.

Your price is obviously unrealistic if the mortgage isn't covered by the rent.

poppy10_2

Can you give us some ideas of the figures involved? House purchase price/current value, and amount of mortgage outstanding?

lynzpower

Its not only the mortgage that you need to be able to have the money for from the income?

Its the taxman
Its your own time
Its your expenses covering the property - specialised insurance for example
its the whole host of repairs and wear and rtear issues, where will you find the money if the roof goes? or the central heating? Or the plumbing? Or even a new appliance?
Gas safety certificates
bailiffs and other assiciated costs- you need to put away for this should it happen
voids, what happens if your tenants move out? how will you pay then?
What happens if your tenants too fall in hard times? can you afford all the mortgage, or would your own living standards be even more at risk?

I dont wish to be presumptous, but would you be able ( in these times too) to take out a loan of a few K should the need arise? What if you cant?

It is SO much better to take the debt as unsecured borrowing, then if needs be, you can go into a Debt management plan to pay it off, or at worst bankrupcy.

Bankrupcy is simply not anywhere near as bad as the potential financial nightmare
that is staring you in the face.

Please take great care.