Are you looking to move but can’t find a buyer for your property? Plenty of homeowners are finding themselves in the same position and joining the growing ranks of accidental landlords. Situations often don’t work out exactly as we would like and the housing market isn’t an exception. Uncertainty over Brexit and other circumstances beyond your control can result in your property being sat on the market for longer than you would like, leaving you treading water before you move on to your new life in your new home. You’re not the only homeowner in this situation.
A possible solution is to let your current property, enabling you to make the move to your new home and use the rental income to cover the mortgage payments on your existing property.
So what do you need to know if you’re considering becoming an accidental landlord?
The first step is to get in touch with your mortgage provider and inform them of your situation. Many lenders are able to offer you a short-term consent to let agreement, maintaining your current mortgage while you let your property for a period of up to 12 months.
Although your mortgage provider isn’t obligated to allow consent to let, this could be an ideal solution if you think the market conditions in the area will improve and the chances of selling your home will increase 12 months down the line. For a longer-term solution, you could swap your residential mortgage for a buy to let mortgage. Although the switch is relatively straightforward, the downside is that you might not be able to secure a loan as large as your existing mortgage and the interest on your repayments may also be higher. An arrangement fee is also usually required to complete the mortgage switch.
How easy is it to get a buy to let mortgage?
The criteria for buy to let mortgages has been tightened up in the last few years. Consumer buy to let legislation was introduced in 2016, aimed at providing the same protections to accidental landlords that are afforded to those seeking a residential mortgage.
Do I have to pay income tax?
Yes. Previously you could claim tax relief on the interest on buy to let mortgage repayments, only paying tax on the profits accrued and with the rate of tax depending on your tax band. However, legislation has changed and landlords are now required to pay tax on their entire rental income, with claims for tax relief capped at a rate of 20%.
Changing your insurance policy
Your current home insurance won’t cover the switch to a rental property. You’ll need to get in touch with your insurance provider and inform them of the changes to your situation. Taking out landlord insurance usually covers you in the event of damage to your property from unruly tenants and any possible loss of rental income.
Your obligations as a landlord
In your new accidental occupation as a landlord, you’ll be required to adhere to some legal obligations.
Verifying your tenants right to rent
The 2014 immigration act requires landlords to check that their tenants have the legal right to rent a property in the UK. The government provides a list of the accepted documents to prove eligibility of tenants on their website. Failing to perform these checks can result in fines and possible jail time.
Protecting your tenant’s deposit
You are required to place any deposit you take from tenants in a government certified tenancy deposit scheme. There are three schemes to pick from – Tenancy Deposit Scheme, Deposit Protection Service, and MyDeposits.
Does your property meet safety requirements?
It’s your responsibility as a landlord to ensure your property is safe for occupation. This includes getting a registered professional to check any gas appliances, electrical fittings, and fire safety requirements.
Do you need a license?
Depending on local legislation, you may need to purchase a license to let your property. The cost of the license varies by location but ensures your property is of a standard to be let.
Is your property ready for the rental market?
The greatest challenge many accidental landlords face when they choose to let is overcoming the emotional attachment they have to the property. Selling your home and moving on can be tough, but seeing someone else move into the place you’ve called home can be even more difficult.
Will you be offering your property to let as furnished? If so, take the time to consider the furniture you will be providing. Remove anything valuable or of sentimental value. Apart from the possibility of it being damaged, tenants generally prefer a property that isn’t filled with the owner’s personal belongings.
George Drennan is a writer on all things real estate and the founder of Eagle Content, a UK based copywriting company that helps brands and businesses connect with their clients. A graduate of University College Falmouth, he currently resides in Shropshire.