Re: Renting UK house while in US - mortgage company's expectations?
 

Your calculations are close to the mark. However, the principal payoff is only money in the bank if your property holds its value and as you no doubt realize, property values have been dropping like a rock.

My mortgage is a lifetime tracker at .59% above BoE. Before the drop in BoE, my monthly payments were over £1,000 pcm. In the intervening 30 months, I've paid about 12k off the principal, spent 12k on necessary repairs, and the value of the property has dropped by 25k from the purchase price. If I sold now (even if I could), I'd get about as much as I owe on the mortgage. That would consolidate a £25k loss on the original purchase price (£165k) and a loss of the £12k spent on repairs and improvements (I'm talking rewiring, replastering, etc.), plus of course the estate agents and solicitors' fees, HiP costs, etc.

The house is a 3-BR former council property that is one of the least expensive houses in the area. I bought it as soon as I moved here because everyone was saying get on the ladder or you'll never get a chance later on (and indeed, house prices had gone up by about 25% in the time between me applying for jobs, returning to UK, spending 9 months working in S. Wales, and coming up here). I planned to downsize to a 2BR within 12 months, but the housing market put the mockers on that plan.

The whole piggy bank/pension analogy no longer applies to property. Buy to Let no longer makes sense. Except for those who have the capital to snatch up current housing bargains and put at least a 40% deposit on the property.

Re: Renting UK house while in US - mortgage company's expectations?
 

I've thought about it, but I can't see the bank allowing me to switch to interest-only at the same interest rate. With effectively no capital in the house (because of the drop in value), they'd likely charge an exorbitant interest rate, in which case interest-only payments wouldn't be far off what I'm currently paying as a regular mortgage. I currently owe 140k on the mortgage. 6% interest only would be ... £700 pcm. :(

The whole housing/mortgage market now works completely differently than it did just 2 or 3 years ago, especially for those who bought in the past 2-4 years. People who bought 10 years ago or so are hardly touched by the current mortgage/housing situation (unless they remortgaged and added to the loan, of course). I've heard people on TV complaining that they can no longer get £500k for their house (that they bought for £50k back in the early 90's), it's now "only worth" £425k. These are not the people who are truly affected by the banking/mortgage crisis.

Re: Renting UK house while in US - mortgage company's expectations?
 

Yes, I see what you are saying. I think the lack of capital in the equation might also make it harder to re-mortgage - as I understand it the best deals around are for those borrowing only 75 - 80% of the value.

We bought our house in the UK in April 06, so almost at the peak. We spent a fair bit on renovations through 07 into 08. The extra spending, coupled with the general drop in values didn't leave us with a lot of equity - I think we were lucky to scrape through a valuation with gave us 20% equity at the point we were re-mortgaging.

Maybe worth checking out the forums/articles on moneysavingexpert - they are likely to be the most up to date with the lending situations.

Re: Renting UK house while in US - mortgage company's expectations?
 

My mortgage is with Alliance & Leicester. A few years ago, it cost something like £150 to get permission to rent your house out if you have previously lived in it.

When I was sorting things out for my recent move, I found that this cost and procedure had changed a little: a quick chat on the phone and then an annual fee of approx £90 each year.

My household insurance cost/price has not changed, however this is because I was previously unable to have contents insurance as I had lodgers. So, it may well be cheaper for you (Dunroving).

Remember to negotiate on the letting agent's management fee. They may not budge, but it's worth an attempt :)

(This is the 4th place I have done this to, the 3rd that I have lived in as a home and then gone on to rent out.)

Re: Renting UK house while in US - mortgage company's expectations?
 

I understand your point regarding falling property prices but, and this really is very dependant on location, in the longer term the analogy will hold true (imo).

One of the reasons is that property usually bears an income and as such that acts as a hedge. The principle debt is being eroded by inflation (and we certainly have that!) which in turn will increase property prices later on down the road. At £650 per month rental income your house has a decent return ratio compared to most properties recently.

Interest rates won't rise meteorically for the next year or two at least, and even then I don't think the BOE will go for 6% plus.

At least by NOT selling up right now, you can amortize the loss rather than bear it all in one go.

Can you not swap the mortgage to an interest only mortgage? Will give you an income and some breathing space at least?

Re: Renting UK house while in US - mortgage company's expectations?
 

Not sure I understand what amortizing the loss means ...

Re: Renting UK house while in US - mortgage company's expectations?
 

I think you're still better off repaying some of the capital. Everything seems gloomy on the house values front right now but given the population pressure in Britain, the demand is always going to be there. Do you have a job offer, then dunroving? :cool:

Re: Renting UK house while in US - mortgage company's expectations?
 

You can pay the loss down over time (i.e. with your monthly payments/let inflation erode the value of the debt) rather than take the hit in one go.

Like I said I personally think the risk is to the downside still, but the entire UK property market isn't uniform, you should think of it as each area in its own micro market. So your property may not be hit as bad as others.

At your price point though, I don't think values can be depressed*that* much further (famous last words).

If it were me I'd switch it to interest only, rent it and net the profit for a few years while interest rates are low. Only problem is that should you sell the house after 3 years of renting it out, and you make a capital gain, you'll have to pay tax on it (a much better problem to have!!!).

Good luck whichever you decide.

Re: Renting UK house while in US - mortgage company's expectations?
 

May have to pay tax :) There are a lot of deductions available, including an allowance for renting it out (as compared to a vacant second home).

Re: Renting UK house while in US - mortgage company's expectations?
 

No job offer, but one or two promising insider tips about possible jobs coming up. Most universities are in a really tight spot re: hiring new people. Academia in the UK seems as bad - the emphasis is on cutting public spending and wages/personnel are the biggest budget item in most institutions. Easy enough to shove 60 students into one classroom where there used to be 30 students in two classrooms.

Not sure what worries me the most - the possibility of making a big loss on selling my house, or moving overseas and being unable to rent it out.

Re: Renting UK house while in US - mortgage company's expectations?
 

I recently moved from the UK to the US (2 months ago), and decided to rent out my UK property while I'm over here. I spoke to Lloyds TSB (my mortgage provider), and they said I'd have to transfer it to a buy-to-let mortgage. I had to pay a £300 admin fee, but that's all there was - the terms of the mortgage (interest rate, length etc) haven't changed. For reference, I took out my mortgage 3 years ago - it's interest-only, about 90% loan-to-value (originally) and 5% fixed rate.

Finding a tenant took a couple of months, and it's not quite covering my mortgage if you include estate agents fees (I'm paying about £2k/month for the mortgage, and net rental income is about £1900).

Re: Renting UK house while in US - mortgage company's expectations?
 

Can I ask: Did they re-value your house when you switched to BTL, and was it still 90% LTV? If so, I'm surprised. Most houses bought 3 years ago at 90% LTV are now in serious negative equity.

Re: Renting UK house while in US - mortgage company's expectations?
 

No, they didn't revalue it. I paid the admin fee, and literally all they did was send me out a buy-to-let mortgage contract with the same interest rate, term and monthly payment as I'd had before.

Re: Renting UK house while in US - mortgage company's expectations?
 

Just an idea.....perhaps in your area you could approach the local council or housing associations. I know that in some places they need to house people on their waiting list and they don't have enough properties to go round. I knew a few years ago they used to rent your property long term and guarantee to put it back in good decorative order at the end of the leasing agreement. Obviously your mortgage lender would need to agree.

Some links here:

http://www.modoracle.com/housing/renting_out.html (scroll down for HA's and council lettings)

http://www.south-ayrshire.gov.uk/hou...enovating.aspx

Re: Renting UK house while in US - mortgage company's expectations?
 

Neither my nor my husband's mortgage lender agrees to this, nor do our house insurers. I suspect that very few lenders would agree.