Renting out property with mortgage

Marvel1

Start here and read everything a guide by G_M:

https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants

Note: Using an agent does not withdraw your responsibilities.

Storkeyj

Thanks guys!

This purchaser has increased to 186 from 180. Our estate agent has advised holding out until atleast 190 as the lowest property in our road sold for 195..

We pay back capital it is not interest only.

I think I'm trying to convince myself that if we rent out we will be better off as we will have less on the mortgage so the amount we sell in a years time we will have more equity even if we sell at the same/ little lower than now.. plus we would have saved both our salaries. 🤷!♂️🤷!♂️🤷!♂️

Fingers crossed we have our open day Saturday and it will sell and all this worrying is for nothing!!

G_M

Don't try to sell and rent at the same time. Rarely works unless you get another landlord (who won't want to pay full market value).


How much of your mortgage is capital repayments? how much is interest.In the early days (first 5+ years) most is interest. In the later days (last 5+ years) most in capital. Relevant as you only claim tax relief on the interst part. This willimpact your budget, which is lready tight.


£850 pm? Maybe who knows, but it won't be every month! If tenants leave you get a void before new ones are in place so.... 2 months no rent? This could be as much as twice a year.


Boiler breakdown? £2000 for a new one?


Do a realistic worst-case budget! (and read my guide...)

kingstreet

G_M wrote: »

Relevant as you only claim tax relief on the interest part...

... and this is changing to limit the "relief" you will be able to obtain in future.

Gwendo40

Storkeyj wrote: »

Hey,

Just looking for a little advice! So we have been trying to sell our property however the market isnt giving us the money we ideally need

Why do people always feel the need to use such obscure euphemisms such as this?

They just can't bring themselves to say ''it turns out our house isn't worth as much as we'd like to think it's worth''

wine_night

If you let a flat, you as landlord are responsible for the ground rent and service charges. If these are £100+ per month and you add in agents’ charges then you will cost you to let it out.

As other posters noted, it depends on what the capital vs interest split is on your mortgage payments. You would also have to split this for your tax returns.

My gut feeling is that financially the numbers don’t stack up- unless you’re expecting significant capital gains on the property. Being a landlord is a hassle, especially if you aren’t making any money.

If you’re moving in with family presumably you would hope to save more than the difference between in what you want to achieve and what’s been offered?

Storkeyj

Thanks for the advise Gwendo40!

Year 3 ( this year ) is just over 5k interest and just over 3.5k capital.

I will read through your guide at the weekend and hopefully settle our decision! We just dont want to loose equity from the property if holding out for a year would benefit us.. we dont mind paying a little extra each month, we arent looking at this as a money making through the renting just how it will work for us over the coming year or 2 and whether by then we would make more money.. potentially we could keep the property i am in the position to do so but that a whole other kettle of fish haha

Slithery

Storkeyj wrote: »

Yes but we will be saving money as well as paying off the mortgage?

Is this before or after you've taken into account income tax, agency fees, yearly gas checks, referencing, maintenance, void periods, additional SDLT and all of the other 1001 costs that being a landlord involves?

Storkeyj

This post was set to determine that point exactly, this would be our first rental. Agency fees are around 10% perhaps negotiated lower to 8 ish?! Maybe. Potentially looking to put £500 ish to one side each month solely for any unexpected costs in relation to the property. We were just looking to see the potential costs from someone that has done this before!? I know that's difficult as all properties are different but even a rough guide of what could be expected on a monthly basis of outgoings. the estate agents fees include referencing, we will be covered by the included insurance for legal expenses, it includes rental cover of up to 20,000 including legal fees, landlord insurance, inventory check, 3 monthly visits and reports and many others.

kingstreet

The rules on mortgage interest are changing over five years so they will be finalised inn 2020/2021.

We started with landlords able to offset all their mortgage interest against any surplus rental income for tax purposes at the highest rate of tax paid.

Eventually, this will be limited to 20% and to a reduction in tax to the extent of the tax payable.