Renting advice needed desperately

fairynough_2

Briefly my son has new job, (higher tax bracket) Its taking him 2 hrs to drive to work & again in evening. His home is unusual & wont sell easily. Has option to buy small run down place nr work and do up very cheaply. Partner would join in that mortgage with him. Wants to rent his house, great coastal area etc., The rent advised by letting agency falls short by £200 of his mortgage repayments on his property. Will he be taxed on this? even though it will be part payment of his mortgage. He has also been told will have to change his mortgage, is this correct, does anyone know these answers and the best mortgage for him. If he has to pay tax on this can he claim it back when claiming for repairs etc.
Bsically, he needs to live nearer work, and as he cant sell his house has had to look at other options.
Any advice most welcome for this newbie.....thanks v much

Doozergirl

He won't pay tax if he's making a loss

He needs to ask his mortgage lender for permission to let the property out. It may mean a slight increase in his mortgage repayments but he doesn't have to apply for an entirely new mortgage.

Why can't he sell his house?

Wings

You say change mortgage,is that on his present home,if so that may not be so, he needs to inform his present mortgage company and advise them of his intentions,some companies do consent without imposing additional interest charges.

Your son needs to view renting his home no differently than any other type of business, all costs for doing the same can be deducted against the gross profits/rent received, those costs include mortgage interests payments,property insurance, repairs, transport, telephone, decorating, accountancy fees etc.etc.

Being a high rate tax payer,the difference in the rental payment to that of his mortgage payment can be offset against the tax he is presently paying, although he needs to view and plan ahead for avoiding CGT.

MarkyMarkD

He can't offset a rental loss against his other income, irrespective of him being a higher rate taxpayer.

It's important to note that the mortgage interest can be offset but not the total monthly payments, if they include an element of repayment of capital.

But, based on a £200 shortfall, it's quite likely he isn't going to earn rental income in excess of the mortgage interest in which case no tax is due in any case.

Tiger_greeneyes

If your son wants to explore other mortgage companies, there are companies who specialise in Buy to Let mortgages - try Mortgage Express.

fairynough_2

thanks everyone.
The reason his house hasnt sold in 3 months is, its very unusual, ie small, quaint, olde (parts are wattle and daub)
Its too small for families, stairway (round and stone) too difficult for retired couples. Its ideal holiday house as its near the coast in Kent, but will only appeal to those like the unusual. In the meantime he has this horrendous journey to work which with roadworks is taking longer and longer.

Doozergirl

Rent it out as a holiday home then, it would probably generate more income for him! People aren't so fussy when it comes to holiday homes and they often like things more quirky than they might ordinarily!

You usually only get basic information like the number of bedrooms and a picture of the outside, which, if it looks quaint, will draw interest, I'm sure.