Should I Rent Out My House To Get Out Of Negative Equity ?

hnisc

I am in the unfortunate position of being in negative equity by quite a bit.

Should I rent out my house for a year or two and with the savings pay off some of my mortgage to get back into the black?

Do mortgage providers allow this and how easy is it to do?

cattie

You would need to get consent to let from your lender & unfortunately not all of them agree. Some people do still go ahead without consent but it's risky & you could be in breach of your mortgage conditions if found out.

Could you rent out a room or two whilst remaining in the house to help with the finances if you can't get consent to let?

I don't know if it will help if you mention who your lender is, as other posters may know those that are more likely to agree than others?

HousingBear

What problem are you having with negative equity? NE is usually only an issue if you have to sell or remortgage. Or are you saying that you can't afford your replayments?

Have you explored other options such as the rent-a-room scheme? You get up to nearly £5,000 tax-free (legally) from having a lodger. I always had a lodger when I was in NE in the 1990s.

HousingBear

cattie wrote: »

You would need to get consent to let from your lender & unfortunately not all of them agree. Some people do still go ahead without consent but it's risky & you could be in breach of your mortgage conditions if found out.
/QUOTE]

And possibly your insurance as well.

BenL

Have you got somewhere else to live?

hnisc

I actually live with my fiancee so renting out the spare room wouldn't be ideal. The mortgage provider is Alliance & Leicester. The plan would be to move back in with the parents. I know negative equity isn't really a problem unless you need to sell but unfortunately that is the case.

pinkshoes

hnisc wrote: »

I actually live with my fiancee so renting out the spare room wouldn't be ideal. The mortgage provider is Alliance & Leicester. The plan would be to move back in with the parents. I know negative equity isn't really a problem unless you need to sell but unfortunately that is the case.

How much is your mortgage, and how much could you achieve in rent per month?

Phone your mortgage advisor and discuss it with them, but many of them want you to have 25% equity to rent it out, or at least have the rent covering the majority of the REPAYMENT mortgage...

Dinah93

How much would you get for rent compared to how much you pay on the mortgage? On average a property will only be filled 5 out of 6 months, and there are heafty fees involved with paying a letting agent, repairs to the property, damage etc. If the profit from renting is any less than 20%, or about £200 a month, I wouldn't seriously consider it.

gfplux

Hello HNISC,
Have you looked at the numbers?

Let us just imagine your lender gives permission.

Say you pay mortgage £750 per month = £9000 per year say for two years = you have paid £18000. Problem is this may be mainly interest and you may have reduced you outstanding mortgage by say = £2000

So you move out and you rent your house out for £1000 per month = £12000 per year for two years = £24000. less extra insurance because you are renting out, less Tax?. let us say you have in your hand £23000, and assume you have a perfect tenant who stays for two years and pays the rent on time every month (they do exist )

So £23000 rental income less £18000 mortgage payments = you have £5000 to pay to reduce your mortgage.
Assuming your parents let you live rent/gas/electricity/council tax free.

Does this get you out of negative equity?

Hope this example is of help.
Perhaps you could post what you mortgage is and what you imagine you could rent your house for.

Debt_Free_Chick

hnisc wrote: »

I actually live with my fiancee so renting out the spare room wouldn't be ideal. The mortgage provider is Alliance & Leicester. The plan would be to move back in with the parents. I know negative equity isn't really a problem unless you need to sell but unfortunately that is the case.

Sorry - as I'm not being intentionally difficult, honest but ..... why is "that the case"?

Are you saying that you can not afford to pay the mortgage on your property, whilst living with your fiancee? And you still can't afford to pay the mortgatge if you live with parents? Could you afford the mortgage if you and your fiancee moved back to the mortgaged property?

We're just trying to evaluate all possible options for you, so the more you can tell us, the more relevant our advice.

Cheers

hnisc

We had a problem with our next door neighbour being very noisy (social housing tenant) and it took a year of continual recordings and very nearly a court appearence to get them evicted. A new person has now moved in and although not as bad they are noisy at night etc bring people back during the early hours of the morning. Loud enough to hear through ear plugs. We just cannot put up with it all again and if you start another noise complaint process you obviously need to state this if selling.

The thinking behind my idea is to rent for a year or two and hopefully have saved enough to at least get out of the negative equity (house prices rising + savings).

However, having looked at my lenders Buy to Let options there is only a 5 year fixed term with 75% LTV so I'm guessing renting the house is a no go