Do I need to inform mortgage company if renting out house?

minnie123

Thrugelmir wrote: »

If you move out and the rent doesn't cover the interest. I fail to see what you are achieving? As an accountant surely you would only do something if it was profitable. At the very least you should be making a post tax profit that enables you to repay capital off your mortgage.

You are doing little more than gambling that property prices will rise. significantly. In the current economic climate this is unlikely.

Best to stick it out and overpay your mortgage. As the costs of buying and selling property wouldn't really make it worth while for someone in your position.

I don't want to do this for any financial gain - the reason is me and my family need more space and as we are unable to move due to a fall in house prices. My dad said I could rent one of his houses at a cheap rent. The house I would be renting is a lot bigger and nicer than my house and has a garden which we want now we have a little one.

I would be renting mine out for £575pcm and paying my dad £500pcm to rent his so I would be no worse off financially and be living in a much nicer house.

minnie123

I spoke to my mortgage company (first active) I have to apply and they charge a fee of £100. All sounds positive.

Fire_Fox

minnie123 wrote: »

I don't want to do this for any financial gain - the reason is me and my family need more space and as we are unable to move due to a fall in house prices. My dad said I could rent one of his houses at a cheap rent. The house I would be renting is a lot bigger and nicer than my house and has a garden which we want now we have a little one.

I would be renting mine out for £575pcm and paying my dad £500pcm to rent his so I would be no worse off financially and be living in a much nicer house.

You are doing this for financial gain, you are banking on house prices increasing so you have more equity.

You stand to make a huge loss. You will let the house for an average of ten months a year so £5750 income. The interest on your current mortgage deal is £8140 assuming the bank let you remain on the same deal. That's a £2400 per annum shortfall without taking into account any letting agency fees, bills when the house is vacant or repairs. Can you afford £500 a month rent plus at least £200 a month on the old house? Can you afford both places if you don't find a tenant or your tenant doesn't pay his/ her rent?

Dinah93

Say it takes 5 years for the property to get back to an acceptable level for you to sell. Gonig by the level of interest you will have as shortfall over that time, plus a contingency for repairs nessisary, redecorating/gardening between tenants it is likely you will pay out at least £15,000 waiting for prices to rise. Obviously 5 years is a guess, however I don't think prices are about to shoot back up again, personally I think they have further to fall first, even if they stablise there is no indicator to show they will start to grow again. Add in the fact we're at a historic low for interest rates, and when your deal ends you'll likely be paying more interest per month than you are now would suggest you'll be paying out more to prop up this 'asset' than you had planned.

Think very, very carefully, a small loss now could save you a lot long term.

princeofpounds

Why is everything so complicated. So basically my mortgage company could refuse to allow me to rent my house out if they wanted to.. does anyone the likelihood of that? How much more approx are landlords insurances compared to residential.

It's effectively not your house. Although your name is on the title deeds the bank actually has a first charge on the house through the mortgage. So it's not so surprising.

minnie123

Fire_Fox wrote: »

You are doing this for financial gain, you are banking on house prices increasing so you have more equity.

You stand to make a huge loss. You will let the house for an average of ten months a year so £5750 income. The interest on your current mortgage deal is £8140 assuming the bank let you remain on the same deal. That's a £2400 per annum shortfall without taking into account any letting agency fees, bills when the house is vacant or repairs. Can you afford £500 a month rent plus at least £200 a month on the old house? Can you afford both places if you don't find a tenant or your tenant doesn't pay his/ her rent?

I see what you are saying but I would be making the same loss by staying living here. The house I am renting is mortgage free and owned by my dad - if my house was empty he wouldn't expect me to pay rent on his house. My sister lived their for a year rent free I have just offered to pay rent because I think that I should.

I was obviously hoping that my house would rise and a bit and my equity increase but I know that may not happen. I'm on a fixed deal until October 2010 and I have charges to pay if I sell the house before then which is why I don't want to sell up.

What would you recommend I do in my circumstances?

minnie123

princeofpounds wrote: »

It's effectively not your house. Although your name is on the title deeds the bank actually has a first charge on the house through the mortgage. So it's not so surprising.

They said I can rent it out.

tbs624

minnie123 wrote: »

I see what you are saying but I would be making the same loss by staying living here. The house I am renting is mortgage free and owned by my dad

Have you taken your Dad's tax liability on your rental payments into your equations?

minnie123

tbs624 wrote: »

Have you taken your Dad's tax liability on your rental payments into your equations?

No because it's my dads liability not mine. He allowed my sister to live there rent free for a year so he is pleased I am going to be paying him and having to give some back to the tax man won't affect him as he will still be better off than getting no rent at all.

Fire_Fox

minnie123 wrote: »

I was obviously hoping that my house would rise and a bit and my equity increase but I know that may not happen. I'm on a fixed deal until October 2010 and I have charges to pay if I sell the house before then which is why I don't want to sell up.

What would you recommend I do in my circumstances?

We have given recommendations, but you seem to be looking for someone to tell you what you want to hear. Put the house on the market, it probably won't complete before October anyway, then move into your Dad's house. I can't believe the charges for early redemption are more than the cost of running two houses.