PROPERTY
PROBLEM MEETING THE MORTGAGE?
Don’t sell, let! ALAN STEWART
CAXTONS’ ALAN STEWART CONSIDERS WHETHER LETTING YOUR HOME AND RENTING A SMALLER PROPERTY IS A VIABLE OPTION.
Life is tough, very tough. Most of us have had some first hand experience of the economic squeeze during the past four years – and belt tightening has become an art form as well as a way of life. But what if you run out of cunning plans to keep the wolf from the front door? What if you can no longer meet your monthly financial commitments? What if you can’t pay the mortgage? Alan Stewart BSc FRICS MCIArb, Director and Head of Residential Lettings & Management at Caxtons says think carefully before selling up. It may be better to consider letting your home – undoubtedly a very valuable asset – while you rent a smaller property for considerably less. This way you will retain your home and ease the pressure on what is probably a desperate situation. If you think that becoming a ‘reluctant landlord’ is for you to allow time for the property market to recover and economic hard times to abate, then there are a number of issues to explore. If you have a mortgage, it is sometimes possible to let your property without the complication of changing your mortgage and becoming a Buyto-Let landlord. As long as you obtain permission from your lender by way of a ‘Consent to Let’, then you will not breach your mortgage agreement. What is more, you will usually remain on your existing mortgage arrangement and pay your current interest rate. Every lender is different though and some may impose additional charges so be sure you understand exactly what you are signing up to. You should be aware that the money you receive in rent will be taxable, although the tax liability can be reduced by offsetting some expenses against the income. You will need to cover all repairs as they occur, keep up the mortgage payments if there is a period of vacancy between tenants and comply with safety regulations. Some regulations are easier to comply with in a modern house, as it will probably have smoke detectors already fitted. You will also require a certificate from a Gas Safe-registered engineer confirming that the gas appliances have all been checked and comply with legal requirements.
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If, after you have let your property, you later decide that you want to sell, then you may be subject to Capital Gains Tax (CGT). CGT can be complicated and quite worrying but you don’t have to pay CGT on a property you have lived in, which has been your main residence for tax purposes, if you sell it within three years of moving out. Even after those three years are up you may qualify for Letting Relief on up to £40,000 of the gain on top of your usual CGT Allowance of £10,600. These are complicated calculations so you will need to understand all the financial implications before you decide to let. And again, each case is different so it is important to seek professional advice. You may be downcast and feel that it is all too much but don’t be put off! It’s safe to say that if you do your research carefully, downsize and perhaps even move to a less expensive area, you should gain enough financial ‘leg room’ to see out the recession and recover financially – even from negative equity if that is where you happen to be. In this tough economic climate you won’t be the only person suffering a bit of short term pain for long term gain; and what’s more you will still have equity in a property when it’s over. And to make you feel even better, you could always talk to a reputable letting and property management agent such as Caxtons. Our staff are used to steering new and longstanding landlords through what sometimes seem to be the insurmountable hurdles of letting properties. They are dedicated to making life easier for clients both when they match tenants to homes and when they advise landlords of the legal and health and safety necessities associated with letting property. For further advice or information email info.office@caxtons.com or contact one of the Caxtons Lettings and Management offices across Kent. Caxtons, received Highly Commended at the recent Property Management Awards 2011-12, has been nominated Estates Gazette Most Active Regional Property Agent in Kent for the second year in succession, and is one of the largest independent property practices in the South East operating from offices across Kent.