BTL for parents

Hudson1984

nope affordability route is perfect. I can afford both mortgages without overcommiting and the rental income is merely a bonus

Just 15% for their mortgage to save is much easier than 30% so happy with that.

holly_hobby

Hudson1984 wrote: »

nope affordability route is perfect. I can afford both mortgages without overcommiting and the rental income is merely a bonus

Just 15% for their mortgage to save is much easier than 30% so happy with that.

Ahaa .... hold on now ....

If Mum and Dad will be paying you rent in exchange for their occupation, you MUST source a regulated BTL mortgage.

And you may find that a larger deposit (in excess of 15%) is reqd.

Have an hour or 2 with a whole of market broker, whom will source suitable lenders/arrangements, and guide you through the application process.

Don't forget you will need to register for SA, and report the (net of deductions) rental income for tax purposes.

Hope this helps

Holly

Hudson1984

Oh bums! get my hopes up and then dash them :P

not too worried about SA for the earnings as they will be less than the mortgage so completely written off as no profits will be made.

yeah I wait till end of text year when i'll have 10% and see what the go is. If I need 30% so-be-it if not then all systems go

holly_hobby

It doesn't matter whether there is any rental profit or not, this is income that needs to be reported to HMRC regardless of whether there is any tax due on it. So, if you are charging and receiving rent from them, you will need to register for SA, and declare your annual (net) rental income under it - if its a break even, or a loss, thats fine - but it still has to be reported for IT purposes.

You're looking at circa 25% deposit (none of which must come from parents if they are to live in the property) for a regulated BTL.

Hope this helps

Holly

Hudson1984

oh I knew what you ment, wasn't saying I wouldn't register - was merely making a point that I would be expected to pay anything as there was no profits so yes I'd still complete the forms

yep all is a lovely murky clear now

holly_hobby

Sorry, yes, unfortunately mge criteria can often throw a spanner in best laid plans !

Pop back as and when you're nearer lift off, and we'll help as much as we can ...

Holly xx

WestonDave

Just to be clear - obviously you know that its not the mortgage payments but the mortgage interest which is relevant for SA deduction - if your repayments are £300 per month, income £200 per month but interest is only £150 you'll still be making a profit which needs to be taxed.

Hudson1984

WestonDave wrote: »

Just to be clear - obviously you know that its not the mortgage payments but the mortgage interest which is relevant for SA deduction - if your repayments are £300 per month, income £200 per month but interest is only £150 you'll still be making a profit which needs to be taxed.

...............course I knew that.........BUM!!!!!!

becomming more of a pain now! I'd be paying 40% tax on that income above interest and would be charging them £400 so it would certainly not go very far... I do see the rent as a bit of a bonus and the house is really a long term investment itself but if i'm only going to see teeny gains in that long term i'd be better off helping them out in other ways.... hmmmm

holly_hobby

Sorry I thought you knew it was only mge interest (not any capital repayment element) that is a permitted deduction, along with assocaited costs, such as maintenance, essential repairs, blds insurance, safety certs, etc ... etc...

You need to do a good bit of homework on this ....

Here, I've dug this out for you .... which may help in the decision making process ....

http://www.buytolet.net/what-every-landlord-should-know-about-their-tax-liabilities

Hope this helps

Holly x

Yorkie1

One other thing which occurs to me, is whether your parents need to claim housing benefit towards their rent payments?

If they do, and you are not charging a full market rent, then you may find that the council won't pay out the HB because they deem it a 'contrived tenancy' - you'd need to research this point.