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

Comms69

IAMIAM said:

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! 

You're misunderstanding. (Unless you plan on paying off the full mortgage in 2 years). HSBC will have said you need a BTL 'in' two years. But may be happy to give consent for now. There is no change in rates for consent to let - generally. 

I dont understand your point about the rent?

Mahsroh

IAMIAM said:

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! 

If HSBC have said this, then you're right. There wouldn't be any changes to your monthly payment. I find it very surprising that HSBC would allow you to switch to Residential mortgage at a rate of 1.55% to a Consent to Lease with no additional charges, but yes, if this is correct, then the first to Paragraphs of my message above are not relevant. 

steampowered

Without getting too lost in the detail of whether this is even possible, looking at the big picture, what are you hoping to achieve?

- It's extremely high risk - you would be taking on a big chunk of property leveraged up to your eyeballs. If interest rates were to rise by a modest amount, or house prices were to fall by a modest amount, you'd be in deep doo-doo when your initial fix comes to an end, as you'd risk having your equity wiped out and getting stuck on the lender's SVR.
- It's tax inefficient - higher rate stamp duty on the acquisition, income tax on the rent. Especially bad if you are a higher rate tax payer. 
- Keeping this property will limit what you can afford on the next one; meaning a much higher LTV and interest rate on your next property.

You will need to make your own mind up but personally I think this sounds like a recipe for disaster, the risks outweigh the benefits.

I'd either be selling the property you are in, or perhaps rent out the old property while renting in the new area for a year or two while you get to know the area. I'd be putting my money into a tax efficient investment such as a stocks & shares ISA - safer than taking mortgage debt up to the eyeballs on two properties! If you later decide that buy-to-let is a business you want to get into, you can take a cold hard look at how much you want to invest and what would be the best BTL property to buy, once you have a bit more equity.

greatcrested

As well as investigating the mortgage/finance questions, and looking at the rent, overheads, profit and tax, you need to research the legal and practical aspects. Read the stickies:

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

reefer37

Hsbc do no to change the rate on ctl and are one of the better ctl lenders. 
However like many have said what will you do after 2years. The 3% stamp duty is a killer on any decent size property. If you have extra funds well and good but having that amount of mortgage will restrict your new house.

what size price house would you be looking to buy. How much deposited do you already have

Thrugelmir

IAMIAM said:

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. 

The question for HSBC is what the interest rate loading is for year 3 onwards. Then options at end of year 5. Possibly be default onto SVR. 

Mutton_Geoff

IAMIAM said:

I have also contacted two estate agents and my rental would be way above my mortgage payments, at least by £250.

Your rose tinted glasses won't serve you well starting a new business in the current economic climate. Your calculations should be basing rental income over mortgage interest, not capital repayments. That will initially make it look even more attractive but you are ignoring all the other costs in setting up and running a BTL business. I'd say you have everything stacked against you right now, tax reliefs going/gone, rental defaults increasing, investing in an illiquid asset, falling capital values.

Just because a gross rental income is £250 above your repayment mortgage figure does not mean it's a viable proposal.

csgohan4

Another BTL wannabee, seen too many Homes under the hammer? OP like any other business , draw up a business case, what are your overheads, what are your profits, tax and legal implications? Turf it off to an EA, sure they take a % of your monthly rent, but your still responsible for repair costs and legally responsible for anything that goes wrong