Telling lender about buy-to-let by Finance News Bulletin

Published: 23/02/07

My partner and I are homeowners and lately got married We were thinking of selling my home, but would similar to to rent it out I am not sure if I have to get in touch with my lender and/or change to a buy-to-let mortgage My possessions value has increased by at least £20,000

SJ, WrexhamDon't fail to spot your chance to tell us what you think of This is Money and help us shape its futureSorting your finances is easy, so easy you can do it in eight ladder Forget the rest and read thisThis is cash replies: If you are planning to rent out your home, you are necessary to get your lender's permission

In some cases, for example, if it is for a fixed temporary period, the lender will not insist that you change mortgagesBut for those preparation on letting a home over a longer era and not moving back in, the lender will generally insist that you switch your mortgage to a buy-to-let loanYou are not in an unusual situation, increasing information of couples who were both homeowners decide to keep an extra property when they marry or move in together Often populace do not tell their lender they are renting out their property, however, if something goes incorrect you are likely to find out that your insurance is invalid

Most lenders offer buy-to-let loans alongside their residential products, but they come with somewhat higher interest rates If you are exterior any early-repayment penalty period it will be worth shopping around to see if you can get a improved rate elsewhereThe extra £20,000 worth of equity in your property should help you find a high-quality deal - most buy-to-let lenders base their loans on around 85% loan-to-value and require hire income to meet 125% of the loan repaymentsMany buy-to-let investors grasp properties with an interest-only mortgage, as this keeps repayments down and you can offset interest payments on your mortgage against tax on hire profits, along with other expenses such as agents' fees and preservation costs

If you currently have a capital repayment mortgage it could be value considering switching to an interest-only loan, but this will mean at the end of the mortgage term the loan balance will still remain and the property will not be owned outrightThere are tax implications involved in buy-to-let, in conditions of income from rent, and also capital gains tax if you sell the possessions As you have previously lived in the property as your major residence, gains during that period will be exempt, however it is possible to minimise tax liability further by nominating it as your main private house and taking advantage of letting relief If the property has risen substantially in value you should get in touch with a professional tax consultant

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