awestley Posted August 24, 2006 Report Share Posted August 24, 2006 Help! I'm due to complete on my first property at the end of the month. I have taken out an interest only residential mortgage fixed for 2 years. I have just been offered an internal post overseas which means I would like to be able to rent out the property for up to a year. I have put down a deposit of 10% on the property but the rent would only cover the mortgage repayments plus about 10%. I'm not sure if I should explain this to my mortgage company. I fear they will want me to switch to a buy to let mortgage and put a larger deposit down to reduce the mortgage repayments (which I do not have). What would happen if I did not tell the mortgage company and rented out the property? Will my insurances be valid? Also - If I rented the property out for a year and then moved back in would I have to pay capital gains on the property if it were to increase in value. I do not want to lose the property and will not take the job if I cannot find a solution Any advise is appreciated Thanks Link to comment Share on other sites More sharing options...
plym77 Posted August 24, 2006 Report Share Posted August 24, 2006 Hi From a tax perspective any period when you live in the property as your Principal Private Residence (PPR) will be exempt for CGT, which will also mean the last 36 months will be tax free also. In addition, if you rent out a property which has been your PPR you will be entitled to lettings relief which is a further exemption. On top of this taper relief will be available after 3 years, and also you get an Annual CGT exemption, currently £8800. It would therefore depend on the specifics as to whether you woulc have any CGT on the sale. It is a shame that you will not live in the property prior to your post abroad as if you were to live in the property, get posted abroad and return to the property it is probable that period would also be covered by the PPR exemption. I hope this helps Sherena Link to comment Share on other sites More sharing options...
plym77 Posted August 24, 2006 Report Share Posted August 24, 2006 Remember that you will need to declare the rental income and expenses on a self assessment tax return while it is being rented too. Sherena Link to comment Share on other sites More sharing options...
Reg Posted August 24, 2006 Report Share Posted August 24, 2006 I've got both a buy-to-let house (buy-to-let mortgage) and a seperate residential house (residential mortgage). I went travelling for a year and let out my residential house. I did not tell the mortgage company, as long as you keep up repayments they wont hassle you. However, to be on the safe side, you should either switch or ammend your house insurance to cover tenants. Because if the worse happened while tenanted, you would not be insured. If you want to avoid the inland revenue knowing, continue to pay council tax in your name on the property and don't use a letting agent (because they will send the inland revenue your tenancy agreement). I personally don't use letting agents (it's cheaper and they're often ineffeicent), i place an ad in a popular local property paper, download a tenancy agreement from the internet and vet tenants myself ccjs using www.letsure.co.uk, only costs £12 and is instant over the internet. and check work and previous landlord references, telephone calls are best. Best of luck! Link to comment Share on other sites More sharing options...
Reg Posted August 24, 2006 Report Share Posted August 24, 2006 PS Unless you can get someone to pick up the rent in cash each month, than you should declare your income on a self assesment form. (However you can offset your interest payments and other costs, insurance, repairs, travel expenses etc Link to comment Share on other sites More sharing options...
awestley Posted August 24, 2006 Author Report Share Posted August 24, 2006 Thank you all for your generous replies Link to comment Share on other sites More sharing options...
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