Planning to rent out our flat and rent another house

Morrismagic

Hi, was just wondering what peoples thoughts are on the following:

My wife and I have had our flat on the market for a few months now but with no joy due to the current slump that seems to have hit the whole country.

We found a house we really want which is actually being sold by a good friend. We got our mortgage in place for this house as we had an offer made on our flat which for some reason was withdrawn recently.

What we are planning to do now is rent out our flat to another friend who is very keen and very reliable and then rent the house we want.

As far as I see it should be fine as our outgoings remain exactly the same and we will live in the house we really want plus we will still have just the one mortgage in place (our flat) with the security that if anything went wrong we could always move back to the flat if needed.

We can rent this house with a view to buying it whenever we want.

Any comments from anyone?

Morrismagic

Anyone got any views on this? Any comments would be gratefully received.


Many Thanks.

BiggaThanBen

sounds great ! what worries you ?

mlz1413

As long as you have an AST for the house you're renting with inventory AND your friend signs an AST and inventory for renting your flat it sounds perfect.

MarkyMarkD

... and consent to let from your existing lender, which will at least cost a fee and possibly require you to switch to a BTL product.

... and possibly a tax exposure, if your rental income exceeds the interest element of your mortgage payment.

In any case, you need to notify both your lender and HMRC of your intention to commence a letting business, before you do so.

Morrismagic

Thanks for the responses so far, much appreciated. I have spoken to my Lender who said I can do it with no changes to my mortgage for a year, all I have to do is get a form signed from them. After the year has finished I have to then change to a buy to let which is fine by me as that is when my current deal expires so there would be no early redemption fees etc.

The rental income wouldnt be more than the monthly interest on my mortgage payments so dont think I would need to declare this for tax purposes?

As for what am I worried about, not sure really, just want to make sure all goes ok. My friend is a decent guy so dont foresee any issues with him at all.

Can anyone tell me what I need to do in terms of Insurances?

Thanks again.

dopester

Let's hope your friend who you plan to let your flat to remains in employment.

MarkyMarkD

Whilst you wouldn't have to declare your rental profit, in the circumstances you mention, IMHO you still have to notify HMRC as it's a new source of income. There's certainly no harm in doing so.

Morrismagic

Thanks for the comments so far, looking likely that this will be going ahead so fingers crossed all goes well.

If anyone can advise on the Insurance query taht would be great.

Cheers

Cazza

You'll need to make sure your insuranc compny know you won't be living in the property, that it will be a tennant instead. If you have a flat, inform your freeholder or management company and they will be able to make any neccessary amendments to your buildings insurance policy and / or the lease. If you insure the building yourself, inform your insurer as they will probably need to amend the policy. With Contents insurance, it normal for the tennant to arrange their own contents insurance, altough it is possible to arrange a specialist landlords contents policy for any furniture, carpets, curtains etc you might leave behind, HTH!

Morrismagic

A date has been set and its all going ahead which is great, really looking forward to having a house and garden in time for summer (plenty of bbq’s!

So I assume the only insurance thing I have to do is tell my Management company what we are doing so they can change the Buildings Insurance policy as required. I’m sure they arrange this insurance and we pay for it as part of our Service Charge?