natty

After having trouble selling the house we are thinking about renting it out. Currently we have a discounted mortgage at 4.9%. I spoke to my mortgage company and they said If I rented the house out then we would have to go on to a buy to let mortgage at 6.9% !!!!

This would mean that the rent wouldnt cover the mortgage each month !!!

Does anyone know if this is right ???

Do we have to tell the mortgage company that we are renting it out and if so does anyone know of a mortgage provider with a lower rate.

I was really thinking that renting was the ideal option and now to think that we can't even do that is a nightmare.

Any help greatly appreciated

Nat

walaj

usually you will find that buy to let mortgages are at a higher rate than if it is owner occupied. Your property is secured against the loan, and the lender will see it as a higher risk when tenant occupied, as people tend not to look after things as good as when they own it.

The market is also a lot more competitive for ower occupied mortgages, so that will give a better rate.

Remember also the tax consequences, not only on the income but also relief on expenses like mortgage interest.

Not sure of the consequences if you rent out without telling your mortgage provider - I'm sure they won't like it

webgum

We are with Nationwide, and to change the status of the mortgage to one that allowed us to rent the house out was just one form to sign and a stipulation of who we couldn't rent it out to (DSS, students, assylum seekers!).
Are you thinking of changing it to a buy to let mortgage? I don't this is necessary, and they are always higher rates anyway.

JAJ

Not every mortgage provider surcharges the rate like this - shop around for alternatives. Especially if you have good equity in the property and are not looking for a 100% mortgage.

You may also want to talk to someone more senior (eg a manager) in your own mortgage provider - if you have been paying your mortgage without fuss they ought to have you marked as a good customer.

Both your mortgage provider and insurance company do need to know if you are going to rent your property out. I'd also strongly suggest you find a good local agent to manage it.

Jeremy

sharon_gareth

You may want to talk to a specialist in the UK and Oz tax law. From what I understand it your interest on your mortgage is higher than your rent you should get it offset agains your tax in Oz.

The whole foreign investment thingy is a bit of a minefield which I am still trying to get my head round. Can't recomend anyone in the UK (bad experience with the guys we used) but I would recommend you speak to someone so that your money working for you best it can.

If your coming to Perth and need financial advisors to contact this end then I can recommend AustAsiaGroup.com they have looked after us.

Good luck

Sharon
www.immigrate-to-a-new-life-in-perth.com

ABCDiamond

Foreign losses

If your deductible expenses incurred in relation to a category of foreign income exceed your foreign income for that category, you have made a foreign loss in that category equal to the excess.

These foreign income losses cannot be deducted from Australian source assessable income and can only be carried forward to offset assessable foreign income in the same category derived in a later income year. ATO link

In other words: in general terms, under Australian Tax rules, UK losses can only be offset against UK Profits.

sharon_gareth

I was sharing information passed onto me by financial advisors in the UK and had not confirmed the information against the ATO site. Thanks for the link.

As I said it is a bit of a minefield and proper financial advise form specialists in the field probably a good thing (but not the one I used). Be sure to get anything they advise you and you act on in writing, then if they do give you wrong information you can take action.

ABCDiamond

I agree, and further, if you get any info from the Tax Office, ensure that it is in writing, not verbal.
I once got a letter from the Tax offfice stating that any info obtained verbally from the ATO was not guaranteed to be accurate, and that if we acted on such info, and it was found to be incorrect, we would not be exempt from any financial penalties incurred.

Alan Collett

Which is why it can make sense to structure your borrowings such that you borrow from an Aussie lender against the equity in an Aussie based property to buy an investment property in the UK. The interest on the loan from the Aussie lender will be capable of being deducted against your Aussie income under the general rules for deductions incurred in relation to income generating assets ...

However, this isn't always possible practically if you don't intend to sell an existing property in the UK.

Best regards.

DianneH68

This may be a bit controversial but you could risk just letting it out under your current mortgage and not telling anyone?
I have done this before without any problem, but it would be at your own risk.

natty

Thanks to everyone for your replies- It actually looks like we may have a new buyer now so may not need to go down the rental route.

Anyway thanks again, I dont know what I would do without this forum !!!

Nat