_jon_

We considering our options for when/if the US job comes off.


We have a difference of opinion over the house.

We have a 4 bed house in a Worcestershire town, value approx £240K, the mortgage is about £165K and at the moment costs £750 per month (the mortgage is 1% over base rate tracker).

Now the rental we could charge is in the region of £750 (which seems low compared to normal mortgage rates).

We have a friend interested in an informal rental of the house for 12 months.

I would be minded to sell up and take the cash to the US, she wants to keep the house on and rent it out.

Her thoughts are that if the mortgage rate rises we would see the payments go up to £1300 (what they were some 18 months ago), leaving a £500 difference between rent and mortgage.
So we have to fund that £500 from our US salaries (in the region of $120K)

Is there anyone that did similar?

Is it worth it?

Opinions...

budleigh

We came close to renting ours out last year when we thought we would be moving to the US last August.

The rent we could get from ours would just about cover the mortgage and we found tenants very quickly who were willing to sign for a year and a management agency with a good reputation and low management fees.

We absolutely love our house here and with three kids we decided that financing the house in the UK would be a good insurance for us if we ever wanted/needed to come back. I think we would really struggle to find anything similar in this area within our price range. So for us the US salary would have to go a bit further as we would like to continue overpaying the mortgage at the moment so that would mean topping up any income we might get from rent. I think you also have to consider what would happen if it wasn't rented out for a few months between tenants etc.

I think you should get a few EA rental quotes, you might decide to go with a lower-end estimate if the person who wants to rent is a friend but I would think you would want some kind of contract in place regardless.
There are additional initial costs for renting like the electricity and gas checks etc plus any work that might need doing to bring these up to rental standard etc and there is a energy efficiency survey thing now that landlords have to pay for.

How much do you like your house? If you are worried about keeping a foothold on the UK property market you could downsize and buy a smaller two bed property with a buy-to-let mortgage and have it fully managed by an agency?

There are tax implications too if you do a search you should find a recent post that describes the UK and US tax issues of renting in the UK.

Good luck with the decision!

lisa67

we rented our UK house out when we first moved here (long time ago so can't comment on the money issue really) but emmotionally I found it comforting to know that if and when we wanted to go back to the UK (we were only supposed to be here for 2 years) we could move back into our "home". Needless to say we were given the opportunity to stay here in the US and so sold our house after being here 3 years. We rented it out through an estate agent which I would highly recommend as you'll have enough on your plate moving here without the added worry of wondering what's going on back home...even if he is a friend!
How long do you plan to stay in the US?

dunroving

If you decide to rent it out, I'd suggest switching to an interest only mortgage before you leave (would be about £200 pcm at current rates). That way if rates go up, you're not swamped trying to pay the extra from overseas.

If you're concerned about paying off the mortgage, you can always put the extra into a savings account. At least you then have the flexibility of not having to pay the extra, if rates go up (i.e., stop paying into the savings account), plus your money is accessible (i.e., if you decide to sell the house at some time in the future, you won't have to wait for the sale to get back the money), plus if you decide to go back to the UK your house will still be there waiting for you and you can make a lump sum payment from the savings account if you wanted to.

I bought a house in the UK in 1987, while living in the Bahamas (Bahamian $ is tied to the US $). Back then there was not really such a thing as a BTL mortgage or interest-only mortgage. Two things happened very quickly. Interest rates went through the roof and the US dollar went in the opposite direction. My UK mortgage payemnts becae more than I was earning and I had to take on three extra jobs (pool cleaner, swim coach, and gymnastics coach) in order to make the payments. It was highly stressful.

The only glitch with my suggestion is the bl**dy bank may try to switch you to a different (higher, of course) interest rate. If so, not sure what I'd suggest, but don't just smile and say "OK" ... the banks are being right barstewards at the moment (BoE rate has dropped about 5% while most mortgage rates have dropped only about 1.5%).

N1cky

We have kept our house in the UK and rent it out through an agency, we had only had the house for 1 year when we moved out to the US and were tied in to a 2 year mortgage deal which would have seen us paying a big penalty for selling. Have you checked if you will have a penalty for pulling out of your tracker deal?

The rental income doesn't cover our mortgage, and then we have 12.5% of the income to pay to the agency, so we have quite a shortfall already, just praying the rates don't go up too much as we are now out of our deal and on a variable rate.

Personally I find it comforting to know my house is there if we want to go back. Also, as we have no credit history out here we wouldn't be able to get a decent mortgage so at least we are still investing in property. We are in a fairly good situation income wise though, so as long as we have tenants we can meet the shortfall.

We also save up here in the US and transfer a lump sum to cover the next 6 months payments, so we aren't paying fees on transfering money every month.

Ask me again in October though, if my tenants don't renew and interest rates go up

Cape Blue

Can you sell it? There are plenty on here who have been trying to sell their's for 12-18 months so you may have no choice but to let.

Do you want/need the cash for the US.

Do you think you will want to live in the US for ever

Do your think you might move back to Worcester at some point

Plan on the extra cost of lettings insurance plus at least 50 quid pcm of wear & tear money set aside (boiler blows up, house needs repaint, carpet worn out etc) plus annual corgi test etc.

As dunroving says, would be worth going interest only to give you a bit more flexibility.

dave2702

I've kept my flat in Cheltenham and rent it out. I was just going to sell it when the market declined so I'm holding onto it for better days again. Fortunately the rental market is doing well and so I've never had problems renting it out, I have a management company that does all the business side for a 10% fee

Fortunately my flat was really cheap and so the income usually matches the mortgage payments

The pains are the few weeks in between tennants when you have to fund the whole mortgage, plus all the red tape such as energy surveys, insurance payments ...etc

Sometimes I'm minded to become a slumlord

Peter Newton

Don't forget you can deduct up to $25k of your UK rental losses each year on your US taxes assuming you "actively participated" in the letting of the property and your gross income is less than $100k if you are married filing joint.

Ozzidoc

Is that total gross income for both husband and wife?

MsElui

we came over when mortgage rates were much higher and the only way we could meet the monthly mortgage payment from potential rental income - was by switching to a buy to let interest only mortgage. This means we are not paying anything off at the moment- but also means it keeps a foot in the door should we have decided to go back to the uk. We can switch back to a variable rate later on or sell up as and when the market improves. So its a holding position at the moment - not costing us anything. We had about 1 months at the beginning and 3 weeks after a changeover of 'untenanted ' time in almost 2 years - ap pretty good. Repairs has cost us more than anticipated - we have had to replace leaky showers bases etc - all managed by the rental agency but likely not the cheapest contractors etc.

Incidentlly the mortgage was at a discounted rate for 2 years - and they made a cock up and didnt put a minimum amount of payment on the loan - so for the last few months our mortgage payments has actually been ZERO! the discounted rate ends shortly and it will go back up again but we have had a giggle over the silly payment - which were well over 1000 quid in the beginning.

Peter Newton

Yes- assuming you are married filing joint.

By the way, if your gross income is over $100k, the maximum loss allowance of $25k is reduced by $0.50 for every dollar of gross income over $100k, so you can still benefit somewhat if your income is between $100k and $150k.

Also there are different rules if you are married filing seperate.

Ozzidoc

Many thanks. Food for thought...one of us earns nearly nil....the other far too much...

jjmb

If you do let out your house, do make sure you use a reputable agent or you will end up in the mess my Mother now finds herself.

She and my Dad moved to Brittany about 7 yrs ago for a better life and on the whole they have achieved that. However, they decided to keep the house they have in London as a nest egg from which they could get a reliable income. Unfortunately they didn't count on a rogue letting agent who has duped many other people in the meantime.

They have had no rental income for nearly the last 2 yrs. They have tried and failed to evict the tenant several times but it appears the law is always on the tenant's side despite no payment of rent. No only that they have been getting housing benefits and once used my Mothers name for months before she found out via a friend. My Mother was arrested for trying to gain access to her own property but fortunately the charges were not pursued because the police deemed the person pressing the charges was telling outright lies.

As I said this letting agent has not only duped my mother but many others. Here is a link to a BBC Watchdog article on him and his agency .Wintrust Letting ageny
and here is the website he still uses WinTrust Residential
At the end of the article it says the agency had got bankrupt but that is a lie as the owner is living in my Mother's house and still running his business from there. The tenant is his girlfriend.

Hopefully this saga will end by the end of the year when my Mum cases goes to a full court hearing.