Question re: Flat Rental

englishdesi

Hi All,

I would be grateful if someone could help me, I currently live in my flat and pay a mortgage of £1022 per month at 5.99, however my promotional rate comes to an end next week and goes down to £708.00.

I would like to rent out my flat and move back in with my parents, I would be grateful if any of you lovely folk, can give me some guidance as to the following:

1. Do I need to tell the lender I am renting out my flat ?
2. At the moment my buildings insurance is in the service charge, can you tell me if I need to get out separate insurance.
3. I am told, I can get £750 a month rent, would I pay tax on the difference between the amount paid and the mortgage ?
4. Any other tips ?

Ta
English Desi

Annisele

1. No, you don't tell your lender you are renting out the flat - you need to ask! The lender might refuse permission. Whether or not they will give permission depends on lots of things, including the LTV.

2. Not sure; ask the management company.

3. Essentially you'd be setting up in business as a landlord, and taxed accordingly. You can usually offset the mortgage interest against tax, but not the capital repayment part of the mortgage payment.

4. Don't do a thing until you're sure you understand the pitfalls. Get yourself educated about your legal responsibilities. Remember that you'll have void periods, the value of your flat might drop, and you might end up far worse off having rented your flat out than you would have been if you'd just sold it. Pop over to http://www.landlordzone.co.uk/ and ask away there; there are some very experienced peeps on those boards.

madeupname1

Annisele wrote: »

1. No, you don't tell your lender you are renting out the flat - you need to ask! The lender might refuse permission. Whether or not they will give permission depends on lots of things, including the LTV.

2. Not sure; ask the management company.

3. Essentially you'd be setting up in business as a landlord, and taxed accordingly. You can usually offset the mortgage interest against tax, but not the capital repayment part of the mortgage payment.

4. Don't do a thing until you're sure you understand the pitfalls. Get yourself educated about your legal responsibilities. Remember that you'll have void periods, the value of your flat might drop, and you might end up far worse off having rented your flat out than you would have been if you'd just sold it. Pop over to http://www.landlordzone.co.uk/ and ask away there; there are some very experienced peeps on those boards.

excellent post I might say! Might just add that if the mortgage company gives you permission they may well seek to charge you a higher level of interest.

Blakey1982

Essentially you are switching mortgage once you tell the lender you are renting it out.
Repayment (or IO) to a Buy to Let

maybe charges, maybe they wont let you, might just switch it

G_M

There are a huge number of considerations.

Income tax AND capital gains tax: read this.
Budget for 10 months rent a year (ie 10 x 750), not 12. You'll have gaps between tenants, tenants who don't pay etc.
Are you using an agent? That's 10-12% or your rent gone!
Calculate other overheads.
Comply with all legislation.

Read a good book on renting ie Tessa Shepperson's or similar.

Oh - insurance... you'll need to read the policy document for the existing cover. Does it allow tenants? Does it cover malicious damage by tenants? etc etc (and it certainly won't cover contents) Read this.

Fire_Fox

You also need to check your long lease for any covenants prohibiting letting, tenants with pets or other issues that affect your ability to let to whomever you choose. You may need the consent of the freeholder and you may be invoiced an admin fee for getting that consent. Even if there is nothing in the long lease preventing you letting, you must inform the freeholder/ management company to ensure that any invoices or consultation documents reach you safely.

Ditto with your mortgage lender, you will definitely need to ask for consent to lease and make sure they have a forwarding address so sensitive financial documents do not get into the wrong hands. You should consider the implications of tenants who will not pay, trash your flat or cause such a nuisance to the neighbours you need to evict. Tax wise you need to consider both income tax and capital gains tax as the flat will no longer be your main home.