Uncertainty is hovering over the property market and it’s becoming more difficult to sell.

Is now the time to consider whether it’s best to rent out your property instead of selling, or could renting out your property at least offer a short-term solution until the economy is more stable?

 

YOUR EXISTING MORTGAGE 

Does your current lender allow you to rent out your property? Most residential mortgages don’t allow this, so you may need to remortgage with a buy to let mortgage. If your current mortgage has a fixed rate of interest, you should look how long is left on the fixed rate period and early repayment may incur early repayment charges (ERC). ERCs can sometimes be several thousand pounds depending on where you are within your fixed rate term! Check your original mortgage offer for further information and if it’s not clear, speak to your lender. If you
do need to remortgage, consider associated costs with a new loan, such as product fees, valuation and surveyors costs and especially in the current climate, interest rates available for new borrowing.

GEOGRAPHY 

Consider the distance between your home and a rental property. If you’re not planning on using a managing agent, you’ll need to ensure you’re
on hand to solve any problems for your tenant. If home care and DIY
are not part of your skill set, then be prepared to make the time to arrange for local tradesmen to resolve problems. If you’re using a managing agent, check their fees and factor those into your calculations.

PROPERTY CONDITION

Is your existing property in an acceptable condition for renting purposes? You may need to repair/ renovate before a tenant takes up residence. Keep in mind the rental energy performance requirements, as there is a minimum legally acceptable energy efficiency level for tenanted properties. The current level is band E but there’s talk of this increasing to band C in the near future. If your current home is of a more historic construction, bringing the property up to band E or higher may involve investments such as solar panels, insulation, new windows, new heating system or a combination – the costs of which stack up!

TAX IMPLICATIONS

Along with Income Tax and capital gains – you’ll need to account to HMRC for your income as a landlord, which requires a self-assessment tax return. Ownership of a second property also brings capital gains tax into play. Sale of your main residence doesn’t attract a liability to capital gains tax, sale of a second property does. Consider your tax position
with a specialist prior to making a decision. You’ll also need to pay a higher rate SDLT if you’re not selling your current home when buying a new one (although you may qualify for a refund of the higher rate of your SDLT bill if you sell within 3 years of buying your new home).

BILLS

If you’re struggling to sell your property, you’ll be responsible for paying your mortgage and utility bills every month whilst it is possibly standing empty. If you can get a tenant for the property, the rent may cover mortgage payments (and some) and the tenant is usually responsible for the utility bills. When the market stabilises, you can look to sell again and maybe get a little more for your property, especially if you’ve renovated it for your tenant. Being a landlord won’t suit everyone and may not always be economically feasible, but it is definitely something to consider in the current market where selling is becoming more difficult.

If you have any questions about your property and would like advice on when may be best for you to put it on the market, please don’t hesitate to contact Beyond Conveyancing. 

hello@beyondconveyancing.co.uk