What are the tax/income or other implications on renting out my property to move for work?

IAMIAM

House Value, £250k 
Mortgage, £185k
About to fix with same lender (HSBC) for potentially 5 years at 1.55% at 75% LTV

I am contemplating moving for work after this crisis is over (probably in the next 6-12 months)
1. Can I fix now, then maybe release some equity of £20/£30k in 6 months time at 85/90% LTV. This would mean some funding at 1.55% and some at a higher rate %?
2. If I do consent to let for a year or two. The rental income would be around £900, (£250 over mortgage payment). I do not envisage coming back to the property and would like to just leave it as a long term rental and look to buy a future property with the equity release funds in addition to some savings. Is this feasible?
3. Lastly, I do not want to build a big property empire, but do not want to loose the home if I move away for work, hence the potential to rent out. So I would have two properties MAX (one rental and one my actual live in home)
4. What are the tax implications on my rental income, do I pay tax on the full £900 per month? Is this the same if I remain in the UK or move abroad.
5. How the does new lending work, is the existing mortgage payments and rental payments disregarded when applying for a new mortgage?
Will they just take into account my salary deposit again?

I understand there is a lot more to it, but ultimately I just want to get some vague idea and thoughts from people who have been in the same situation.
Thanks,

[Deleted User]

Have you worked out how long it will take the income from the rental property to pay back the increased SDLT for the second property? And if you aren't planning on managing the property yourself, how much LA fees will affect your 'profit'?  Have you budgeted for void periods and repair costs?  That's before all the tax implications (well for me it would be).  

You will be given more links than you can read in a day for the rest.  But I'm afraid, to make an informed decision, you need to know what you'll be getting into.  A superficial understanding will do you a disservice.

blue_max_3

Before you fix, have you checked you have permission to rent out the property by the lender? Typically, they put you on a BTL mortgage which is more expensive. If you fix now, you may have to pay an early redemption fee.

IAMIAM

I have checked most lenders, particularly mine.
CTL is for two years max, apply online.
They say for work purposes is fine.
I am tempted to fix at 75% now at 5 Year rate due to the rate being great and not wanting to loose the property or pay 'extortionate' rate at 90% for all the lending. I will probably be CTL during the second year of the five year period. 

steampowered

This plan is not workable because you don't have anywhere near enough equity to fund a deposit on two properties. BTL mortgages typically require a 25% deposit and typically need the rent to be 125% of the mortgage payments.

You cannot amend a fixed mortgage without triggering an early repayment charge. It would be treated as a remortgage. Also, a lender won't lend you some money at a lower LTV interest rate and some money at a higher LTV interest rate. All interest would be charged at the higher rate.

You shouldn't be fixing for 5 years if you think you might be wanting to move in 2 years time.

AdrianC

IAMIAM said:

House Value, £250k 
Mortgage, £185k
About to fix with same lender (HSBC) for potentially 5 years at 1.55% at 75% LTV

I am contemplating moving for work after this crisis is over (probably in the next 6-12 months)
1. Can I fix now, then maybe release some equity of £20/£30k in 6 months time at 85/90% LTV. This would mean some funding at 1.55% and some at a higher rate %?

No, you'd remortgage the entire property, probably paying an early redemption charge, and pay the higher rate on the entire borrowing.

And you probably wouldn't then get consent to let so soon after remortgaging at such a high LtV.

2. If I do consent to let for a year or two. The rental income would be around £900, (£250 over mortgage payment). I do not envisage coming back to the property and would like to just leave it as a long term rental and look to buy a future property with the equity release funds in addition to some savings. Is this feasible?

Of course it's feasible. Is it sensible?

Simply question... What's so special about THIS property that you don't want to sell it? And can you dissociate yourself emotionally from it being YOUR HOME to being an asset of your lettings business and your tenant's home...?

Then we start to do the maths.

3. Lastly, I do not want to build a big property empire, but do not want to loose the home if I move away for work, hence the potential to rent out. So I would have two properties MAX (one rental and one my actual live in home)
4. What are the tax implications on my rental income, do I pay tax on the full £900 per month? Is this the same if I remain in the UK or move abroad.

You pay income tax on the profits, not the turnover, of your lettings business, after allowable expenses.

5. How the does new lending work, is the existing mortgage payments and rental payments disregarded when applying for a new mortgage?
Will they just take into account my salary deposit again?

You will need to have equity available, yes, because you aren't chaining your sale. Don't forget the +3% SDLT.

Mahsroh

If you're planning on letting the property in the coming months then do not get a new residential fixed mortgage now. Your only realistic option is to keep it on the existing variable rate until such time as you've decided what you're doing then (assuming you do rent it out) get a new fixed deal on a BTL. 

On a Consent to Lease (even if HSBC agreed) you would almost certainly not get the same fixed rate so there are no guarantees that your rent will actually be £250 more than your Mortgage if you take this approach. 

As others have said, you'll need 75% LTV for a BTL so releasing equity in six months time would not really be an option. You only just have sufficient LTV as it is. 

IAMIAM

steampowered said:

This plan is not workable because you don't have anywhere near enough equity to fund a deposit on two properties. BTL mortgages typically require a 25% deposit and typically need the rent to be 125% of the mortgage payments.

You cannot amend a fixed mortgage without triggering an early repayment charge. It would be treated as a remortgage. Also, a lender won't lend you some money at a lower LTV interest rate and some money at a higher LTV interest rate. All interest would be charged at the higher rate.

You shouldn't be fixing for 5 years if you think you might be wanting to move in 2 years time.

This is interesting. HSBC have said many residential customers have mortgages accounts with varying rates when they take out additional borrowing. Also, they have said I would stay on residential mortgage for two years maximum, so don't understand where buy to let is coming in. 
I have also contacted two estate agents and my rental would be way above my mortgage payments, at least by £250.

davidmcn

IAMIAM said:

steampowered said:

This plan is not workable because you don't have anywhere near enough equity to fund a deposit on two properties. BTL mortgages typically require a 25% deposit and typically need the rent to be 125% of the mortgage payments.

You cannot amend a fixed mortgage without triggering an early repayment charge. It would be treated as a remortgage. Also, a lender won't lend you some money at a lower LTV interest rate and some money at a higher LTV interest rate. All interest would be charged at the higher rate.

You shouldn't be fixing for 5 years if you think you might be wanting to move in 2 years time.

they have said I would stay on residential mortgage for two years maximum, so don't understand where buy to let is coming in.

Because the consent to let lasts for a maximum of two years. After that you either have to (a) move back in, or (b) remortgage to a BTL mortgage - the latter of which would trigger an early redemption penalty if you're still on a 5 year fixed rate.

IAMIAM

Mahsroh said:

If you're planning on letting the property in the coming months then do not get a new residential fixed mortgage now. Your only realistic option is to keep it on the existing variable rate until such time as you've decided what you're doing then (assuming you do rent it out) get a new fixed deal on a BTL. 

On a Consent to Lease (even if HSBC agreed) you would almost certainly not get the same fixed rate so there are no guarantees that your rent will actually be £250 more than your Mortgage if you take this approach. 

As others have said, you'll need 75% LTV for a BTL so releasing equity in six months time would not really be an option. You only just have sufficient LTV as it is. 

Again, I do not understand this. HSBC say I would not need a BTL mortgage for a maximum of two years. They have also said there would be no change in rate, fees or an increase in anything for those two years. I also do not understand the issue with the rent guarantee, there is no way my rental would be anywhere near my mortgage repayment in value. It would end up being the cheapest rental on the road! 

IAMIAM

davidmcn said:

IAMIAM said:

steampowered said:

This plan is not workable because you don't have anywhere near enough equity to fund a deposit on two properties. BTL mortgages typically require a 25% deposit and typically need the rent to be 125% of the mortgage payments.

You cannot amend a fixed mortgage without triggering an early repayment charge. It would be treated as a remortgage. Also, a lender won't lend you some money at a lower LTV interest rate and some money at a higher LTV interest rate. All interest would be charged at the higher rate.

You shouldn't be fixing for 5 years if you think you might be wanting to move in 2 years time.

they have said I would stay on residential mortgage for two years maximum, so don't understand where buy to let is coming in.

Because the consent to let lasts for a maximum of two years. After that you either have to (a) move back in, or (b) remortgage to a BTL mortgage - the latter of which would trigger an early redemption penalty if you're still on a 5 year fixed rate.

So I could fund two properties then and I would be using all the rental to pay down the mortgage including savings, I would reduce it back down to 75% LTV if I am forced to BTL or sell and pay the 2% redemption fee (circa £3k)