Is it still income if tenants pay mortgage?

eshroom

My cunning plan to repay my mortgage in record moneysaving time. Perhaps someone can tell me if it will work?

Essentially, instead of bein paid directly by my lodgers, in their tenancy contract the terms will stipulate that they they will pay no rent, instead they have to contribute X amount towards the mortgage - paying the bank direct.

Does this mean that any money they pay to the bank does not count as my income anymore?

I suspect it may be a bit more complex than this, but hope not!

CLAPTON

if they become the beneficial owners of the property then no it is not your income
however if they pay into an a/c on your behalf then it is still your income

Werdnal

I would agree with Clapton. You are gaining financial re-imbursement even though it is not directly being paid to you, and HMRC would probably have issues with it.

missjy

Isn't rent usually used to pay the BTL mortgage on the property anyway, unless it's fully paid off?

missjy

And would you class them as your tenants or tenants-in-common cos by being the latter and contributing to the mortgage so explicitly they could have rights to the house and stake a claim on it of you tried to sell it...if me remembers correctly from my law degree!

sonastin

Doesn't contributing to the mortgage mean that they are entitled to claim ownership of a % of your property? That would certainly be the case with a partner and given that the law doesn't recognise a common law partner as having any special status...

jungle_jane

a. do you have Permission to Let or a buy to let mortgage?
b. Will you be declaring this to HMRC? If not, you are up to your neck in it
c. !!!!!! will you do if one of your lodgers defaults without you knowing it?
d. Have you done any research at all into being a landlord?

In Baldrick's own words: 'I can't see any subtle plan!'

Werdnal

I think OP is talking Lodgers, not tenants. You don't need BTL to take a lodger into your own home so long as you are resident yourself. However, always wise to check mortgage conditions to see whether lodgers need permission!

jungle_jane

see your point! i would still feel queasy though - what if one if his roommates defauted? Is it under the 'rent a room' threshold etc?

eshroom

jungle_jane wrote: »

see your point! i would still feel queasy though - what if one if his roommates defauted? Is it under the 'rent a room' threshold etc?

At no stage would I rely on the lodgers to cover my mortars. My wage would be my guarantee. However, since I hate borrowing, renting out 3 rooms to lodgers would help me clear the mortgage in record time - unless the added income for 3 lodgers (£20k+) pushed me into another tax bracket.

From what I understand rental income can only be offset against interest and not the full repayment.

To address some of the other queries - if they can then claim ownership, I think I'd steer clear. Maybe it's time to find an accountant?

Owain_Moneysaver

eshroom wrote: »

From what I understand rental income can only be offset against interest and not the full repayment.

If you're outside the rent-a-room scheme there are capital and expense allowances you can set against tax: see here.

If you live in the house yourself then you would proportion the expenses and claim relief on that portion related to the rented out part of the house.