Renting out my property

AdrianC

Mike4010 wrote: »

A letting agent said rent would be £725 pm and a mortgage broker had recommended a deal at 75% ltv at 2.79% my current deal which ends in April is 2.49% payments at the moment are £533. the house has been valued at £140,000. I'm a basic rate tax payer at £35k a year. I hope this info helps

Thanks for the information so far

So you're currently paying £533. Of that, some is repayment, some is interest. Quick play with a mortgage calculator says that £533 repayment at 2.49% is for a loan of £119k, and interest-only would be £247.

So you can set £247/mo against the rent for tax purposes. If you were a higher-rate tax payer, you could only set it against at basic rate.

You're paying income tax on £725-247 = £478, £95.60 in tax. So that's £382.40 that you're actually receiving each month, after tax but before any other costs. Agent's fees? Voids? Insurance? Maintenance? £3,824/year. Let's say that's a nice round £3,000/year. Probably optimistic, but there we go.

On a house worth £140k, that's a yield of just over 2%. And that's at the lower mortgage interest rate.

Seems like a lot of work and hassle and sweat for such a low return to me.

AnotherJoe

AFF8879 wrote: »

Someone with more knowledge on this please correct me / confirm - but I believe the tax changes only apply to BTLs being run as a business (I.e on an interest-only mortgage). If you're sticking to a capital repayment mortgage which I assume you are, I don't think you will be any worse off; this is clearly due to personal reasons as opposed to a business venture.

I might stand corrected...

Stand corrected you are completely wrong,

Whether the mortage is IO or repayment is irrelevant to the changes. essentially the changes alter how much tax relief you can get making it less profitable all round and mean that especially for 40% and higher tax payers they could even be making a loss.

The OP needs to decide if they want to lose money in one lump sum, by selling now , or just about break even and have any lot of hassle as a landlord, and hope that house price inflation digs him out of a hole so he can sell.