what My partner and I currently own property in Manchester. We bought the house in 2018 and the value has increased from £150,000 to £200,000. I have been offered a job in London and I am moving there in three months with my partner. We can’t afford to buy in London so we’d like to rent our house in Manchester to cover the mortgage. This is to ensure that we can remain on the property ladder. What kind of fees and taxes can we expect to pay? And would there be any implications if and when we sold the house?
TO The first thing to do is ask your mortgage lender if they will give you permission to rent your home. If you do, there may be a modest fee for your “consent to rent.” However, if renting out your home is a complete no-no in the opinion of your lender, you’ll probably have to switch to a buy-to-rent mortgage. However, this will only be possible if the loan (ie what is left on your current mortgage) represents less than 75% of the current value of your home. Also, the rent you get must be at least 125% of the mortgage you pay. This is not based on wishful thinking, but rather on the assessment of a professional rental agent, who will tell your prospective lender if he or she is likely to achieve that level of rental income. If not, one option would be to switch from a repayment to an interest-only mortgage, which makes the monthly payment lower.
Another thing to consider is how suitable your property is for the rental market. Your house may not be the type of place or the type of area that people want to rent. So it may be an idea to get the advice of a local rental agent, who should also be able to advise you on any modifications and safety measures you need to take to make your home profitable.
When it comes to taxes, when you finally sell the house, because you will have rented it out, you will likely face a capital gains tax bill, but allowances will be made for the fact that it used to be your home.