Renting out current house and buying another?

gazfocus

Hoping this isn't too stupid a question to ask, but I'm just thinking out loud at the moment.

I currently own a shared ownership house (50% share) and I've been looking into our options re selling the house to buy something bigger. Having spoken to the housing association about selling, one option they suggested is renting out my own house rather than selling it.

Where would I stand with mortgages? I'm aware I would have to get consent to let from my current mortgage lender, however, will this affect affordability in terms of getting a new mortgage for the new house?

I'm thinking that this might be a good idea to get a 'quick release' from our current house and put us in a good position to buy something bigger but not sure of the financials.

I'm not overly concerned about becoming a landlord as it's something my sister does and I could learn what I need from her.

egoode

I didn't think you could rent out shared ownership places until after you owned 100% of the place? I'm surprised your housing association said you could as I think this is a government rule and not something decided by the housing associations.

gazfocus

egoode wrote: »

I didn't think you could rent out shared ownership places until after you owned 100% of the place? I'm surprised your housing association said you could as I think this is a government rule and not something decided by the housing associations.

Thanks for your post. It's nothing to do with the government as the housing association control their own lease agreement. I have seen stories where one housing association in one town would not allow letting whereas another in the same town would.

In addition, when we bought our house, it was also up to let by the vendor and I believe it had been rented out previously.

Of course, I also need to look into whether we're likely to get consent to let from Leeds BS.

[Deleted User]

I agree with the above, we are in a similar situation and have to apply to the HA to make a decision on this - so there is not such a "no" rule.

But yes I'd love to know if this can work and how, because we are stuck just the same.

gazfocus

assj wrote: »

I agree with the above, we are in a similar situation and have to apply to the HA to make a decision on this - so there is not such a "no" rule.

But yes I'd love to know if this can work and how, because we are stuck just the same.

I've just spoken to Leeds Building Society and I must say I'm surprised at how willing they are to agree to the Consent To Let.

They said, I have to fill out a form, get a rental valuation and pay an £85 admin fee and that's it.

So now, back to my original question of whether renting out my current house will have a negative effect on affordability on a new mortgage application.

kingstreet

For some lenders it will, for others it won't.

They vary, as with most things. The best you'll find is the let property/mortgage being ignored as self-financing.

gazfocus

kingstreet wrote: »

For some lenders it will, for others it won't.

They vary, as with most things. The best you'll find is the let property/mortgage being ignored as self-financing.

Thanks, this would be my ideal situation. I'm seeing the possibility of renting the house as a 'quick release' from my existing house, enabling us to buy the size house we need. I also think we'd have a fair advantage renting it out because we'd be willing to accept pets, etc which is very difficult to find in our area..

Edit: For the let property/mortgage to be ignored, would there need to be a tenant in the property when I put in the mortgage application?

kingstreet

Depends on lender again. Nationwide wants bank statement showing rent, so you have to let first, then buy.

Others will work on a ARLA valuation. Broker job, this.

leveller2911

Just a thought but I would clarify the position with your Housing Association ,its not uncommon for them to make mistakes and give out the wrong information.

We were told we could buy 100% of ours house , got the mortgage agreed,valuation,etc etc only to be told that it had "just come to light there is a rural restriction so we can only ever own 80% so we pulled ou. This was after the HA had spent 8 weeks clarifying with the Local Authority that we could buy 100%. C0ck up are very common with HA.

I may well be wrong but I think that 95% of Housing Association will not allow Shared Ownership owners/tenants to rent out the property and buy another down to the fact that its classed as sub letting. The tenancy on the percentage you own Gazfocus is for you only and it would be classed as sub letting which is a big no no.What does it say in your tenancy agreement ?.

gazfocus

leveller2911 wrote: »

Just a thought but I would clarify the position with your Housing Association ,its not uncommon for them to make mistakes and give out the wrong information.

We were told we could buy 100% of ours house , got the mortgage agreed,valuation,etc etc only to be told that it had "just come to light there is a rural restriction so we can only ever own 80% so we pulled ou. This was after the HA had spent 8 weeks clarifying with the Local Authority that we could buy 100%. C0ck up are very common with HA.

I may well be wrong but I think that 95% of Housing Association will not allow Shared Ownership owners/tenants to rent out the property and buy another down to the fact that its classed as sub letting. The tenancy on the percentage you own Gazfocus is for you only and it would be classed as sub letting which is a big no no.What does it say in your tenancy agreement ?.

Thanks for your post.

I get what you're saying but the house was previously rented out by the person I bought it off so that does sort of set a precedent. I would also request the Housing Associations permission in writing (and my mortgage lender would also request approval from the Housing Association).

I'm not saying they don't make mistakes and I'm really hoping they haven't with their advice.

The leasehold department are going to send me a list of their criteria but I believe one of the options on there relate to market conditions delaying the sale of the house, which could very well apply.

Brighty

I've done this, rented my house out and relocated. First to check is consent to let, some lenders will want the rent to cover 125% of mortgage or they won't consent, others don't seem to care so long as you fill in a form and pay the admin fee (Nationwide didn't even ask what the rent would be). As above, getting a new mortgage will depend on the lender, some will include both mortgages in affordabilty, some will ignore the old one if it is self financing (rent 125% of mortgage). Natwest ignored ours originally, as did Nationwide when we remortgaged our new home to them recently, although i beleive they limit LTV to 85% max in these situations.
If you're not selling, do you have enough of a deposit saved up to buy the new place? 15% would probably be good?
Other things to consider
Could you afford to pay both mortgages if for whatever reason you had no rent coming in? Gap between tenants, non paying tenants etc? I don't just mean a month or 2, what if a tenant stopped paying and wouldn't budge, resulting in a lengthy court battle to evict?
You would need to register for a tax return and pay income tax on the rent you receive minus allowable expenses such as mortgage interest.

Brighty