Renting a property with a tracker mortgage

Sunrise_Sunset

Hi, I have a tracker mortgage on the property I own. One option I have to consider at the moment is renting it out, for the short term, maybe 2 years or so. I believe I couldn't inform the bank of this though or I'd lose the tracker. But if I then wanted to apply for a second mortgage, sell the property etc, and were providing bank statements to the bank they would see the the rent money coming into the account each month. How have others explained this, in similar situations?

Is one way around it, to apply for the second mortgage with another bank and not tell them it was a tracker? Do I have to disclose this information?

punisher5112

lililanny wrote: »

Hi, I have a tracker mortgage on the property I own. One option I have to consider at the moment is renting it out, for the short term, maybe 2 years or so. I believe I couldn't inform the bank of this though or I'd lose the tracker. But if I then wanted to apply for a second mortgage, sell the property etc, and were providing bank statements to the bank they would see the the rent money coming into the account each month. How have others explained this, in similar situations?

Is one way around it, to apply for the second mortgage with another bank and not tell them it was a tracker? Do I have to disclose this information?

Of course you have to disclose.

dar100

lililanny wrote: »

Hi, I have a tracker mortgage on the property I own. One option I have to consider at the moment is renting it out, for the short term, maybe 2 years or so. I believe I couldn't inform the bank of this though or I'd lose the tracker. But if I then wanted to apply for a second mortgage, sell the property etc, and were providing bank statements to the bank they would see the the rent money coming into the account each month. How have others explained this, in similar situations?

Is one way around it, to apply for the second mortgage with another bank and not tell them it was a tracker? Do I have to disclose this information?

Cash payments.....

Sunrise_Sunset

Would another bank notify the previous bank that the property was actually rented out while on a tracker mortgage? Worried about receiving fines or the like if they were to be notified.

iwillhtfu

lililanny wrote: »

Hi, I have a tracker mortgage on the property I own. One option I have to consider at the moment is renting it out, for the short term, maybe 2 years or so. I believe I couldn't inform the bank of this though or I'd lose the tracker. But if I then wanted to apply for a second mortgage, sell the property etc, and were providing bank statements to the bank they would see the the rent money coming into the account each month. How have others explained this, in similar situations?

Is one way around it, to apply for the second mortgage with another bank and not tell them it was a tracker? Do I have to disclose this information?

Afaik you can still have a tracker mortgage on an investment property but I'm not sure if it would make a difference as yours is obviously your primary residence.

Sunrise_Sunset

Even if I did cash payment, I'd need to lodge it into my account at some stage. How would I explain this large cash sum each month on my bank statements?

tvjunki

lililanny wrote: »

Hi, I have a tracker mortgage on the property I own. One option I have to consider at the moment is renting it out, for the short term, maybe 2 years or so. I believe I couldn't inform the bank of this though or I'd lose the tracker. But if I then wanted to apply for a second mortgage, sell the property etc, and were providing bank statements to the bank they would see the the rent money coming into the account each month. How have others explained this, in similar situations?

Is one way around it, to apply for the second mortgage with another bank and not tell them it was a tracker? Do I have to disclose this information?

Check your mortgage contract as it may say you can rent it out and keep tracker. If you are financially struggling some banks will allow you to rent out short term.
what about rent a room?
When you rent out a property to make it easier open another bank account away from where you bank do a bank transfer of the amount for mortgage payments. Keep records of costs for when you do a tax return and incase you have an audit by revenue.

To be honest 2years rental it would not be worth it as you would have to pay capital gains tax on profit between the value now and the future. Also completing a tax return. Paying 50% tax on rental income.
With all the new laws coming down the line it would cause you major issues. Read some posts in the accommodation section on the site to get a good idea what it is really like as a landlord.

Sunrise_Sunset

tvjunki wrote: »

Check your mortgage contract as it may say you can rent it out and keep tracker. If you are financially struggling some banks will allow you to rent out short term.
what about rent a room?
When you rent out a property to make it easier open another bank account away from where you bank. Keep records of costs for when you do a tax return.

To be honest 2years rental it would not be worth it as you would have to pay capital gains tax on profit between the value now and the future. Also completing a tax return. Paying 50% tax on rental income.
With all the new laws coming down the line it would cause you major issues. Read some posts in the accommodation section on the site to get a good idea what it is really like as a landlord.

I agree I do need to look more into that side of things. Another question is, if I notify the revenue of this, would they in turn notify the bank? Or would they be kept completely separate? Is it possible to not tell either the bank or the revenue, and just renting it out?

I am not struggling financially at the moment. But the property is too small for my family now and I would like to buy a bigger property. The stinger is trying to save the 20% deposit. I have a good bit saved but feel the only way I can really boost this enough is to rent out this property for a while, and maybe move in with family in the short term.

tvjunki

lililanny wrote: »

Even if I did cash payment, I'd need to lodge it into my account at some stage. How would I explain this large cash sum each month on my bank statements?

I have tenants paying cash and I just lodge it. I gave the tenant a rent book so all is there for revenue to see. As long as you have all your books in order you will be fine.
You must declare income.
I know of a woman that was collecting rent from other co tenants and she lodged her account and transferred into landlords account. Revenue asked where the money came from as she was a nurse and the money did not add up based on her income. She could prove where it came from.

_Brian

What interest have the bank in this really ??
Once the mortgage is paid up regularly and on time.

Is this just a reason to knock people of very attractive trackers.

tvjunki

lililanny wrote: »

I agree I do need to look more into that side of things. Another question is, if I notify the revenue of this, would they in turn notify the bank? Or would they be kept completely separate? Is it possible to not tell either the bank or the revenue, and just renting it out?

I am not struggling financially at the moment. But the property is too small for my family now and I would like to buy a bigger property. The stinger is trying to save the 20% deposit. I have a good bit saved but feel the only way I can really boost this enough is to rent out this property for a while, and maybe move in with family in the short term.

If you are getting t r s tax credit then stop once you start renting the property out. If that is over then Revenue will not tell the bank. You want to hold onto your tracker and I get that. You might be able to keep it.

aristotle25

tvjunki wrote: »

To be honest 2years rental it would not be worth it as you would have to pay capital gains tax on profit between the value now and the future. Also completing a tax return. Paying 50% tax on rental income.
With all the new laws coming down the line it would cause you major issues. Read some posts in the accommodation section on the site to get a good idea what it is really like as a landlord.

Capital gains tax is based on original purchase price and any increase in value beyond that. It’s not based on the value at the point you start renting.

tvjunki

aristotle25 wrote: »

Capital gains tax is based on original purchase price and any increase in value beyond that. It’s not based on the value at the point you start renting.

I think this is how it is worked out...
Purchase 100k
Sales price 150k
Purchase price minus sales price. 50k
Refurb costs selling costs legal fees deducted. Say 15k so 50-15=35k

Divide by the number of years owned20 years= 1.75per year.
Rent 5 years
So c g t tax worked out .......1.75kx5years minus 1year as assume you living in the house the last year.
7k.
So 7k x 33% tax ..2.31k


Hope I have this right as working out figures now myself.

Sunrise_Sunset

Rooted out all of the documents I have pertaining to my mortgage. I actually cannot find anywhere in print that it states that as it's a tracker mortgage the property cannot be rented out. Would there be any other documents that I wouldn't have in my possession, but that the bank holds, that would state this?

tvjunki

lililanny wrote: »

Rooted out all of the documents I have pertaining to my mortgage. I actually cannot find anywhere in print that it states that as it's a tracker mortgage the property cannot be rented out. Would there be any other documents that I wouldn't have in my possession, but that the bank holds, that would state this?

Ask the bank to send a copy of your mortgage contract so you know exactly? Some mortgages are not restricted to being homeowners but newer mortgages had restrictions.

punisher5112

Why not sell and use any monies towards the new property and the 20% deposit needed.

Sunrise_Sunset

punisher5112 wrote: »

Why not sell and use any monies towards the new property and the 20% deposit needed.

There won't be any monies. Should be coming out of negative equity this year or next. I'd be happy enough to just break even and write it off as a bad investment and start over.

tvjunki

lililanny wrote: »

There won't be any monies. Should be coming out of negative equity this year or next. I'd be happy enough to just break even and write it off as a bad investment and start over.

New laws coming down the line saying you will not be able to get tenants out if you intend to sell. They will be sitting tenants and only those with cash to buy your property so will be worth less than it is now.

punisher5112

Any way of extending instead?

evolving_doors

Have a tracker
Rang bank
They said no problem let it out nothing would change
Told them to send that to me in writing
They did

Some contracts stipulate that it'll change to buy to let type mortgage and move you off tracker

Sunrise_Sunset

evolving_doors wrote: »

Have a tracker
Rang bank
They said no problem let it out nothing would change
Told them to send that to me in writing
They did

Some contracts stipulate that it'll change to buy to let type mortgage and move you off tracker

What bank? Are some more lenient than others?

evolving_doors

lililanny wrote: »

What bank? Are some more lenient than others?

Tsb

In saying that there was nothing to say that I couldn't in the contract... that might have changed since 2008

Bigserious1

Have worked in three banks. All had terms that the mortgage given was to be used for a persons pdh and if used exclusively as an investment then btl rates should apply.

In practise though we have enough work on desk rather than somehow trying to prove it when it would be a massive hassle which would not benefit any staff.

If you apply for another mortgage with the same bank it could become an issue. If you apply with any other bank they wont care and will stress the rental income and rate in line with their own guidelines anyway.

Sunrise_Sunset

evolving_doors wrote: »

Tsb

In saying that there was nothing to say that I couldn't in the contract... that might have changed since 2008

I'm with PTSB too. I can't find any stipulation in the contract either. I bought in 2006.

Sunrise_Sunset

Bigserious1 wrote: »

Have worked in three banks. All had terms that the mortgage given was to be used for a persons pdh and if used exclusively as an investment then btl rates should apply.

In practise though we have enough work on desk rather than somehow trying to prove it when it would be a massive hassle which would not benefit any staff.

If you apply for another mortgage with the same bank it could become an issue. If you apply with any other bank they wont care and will stress the rental income and rate in line with their own guidelines anyway.

It's PTSB. If I apply for another mortgage with them I'd probably be interested in the tracker portability they are offering. If I went with another bank, I don't then have to disclose that it's a tracker?

Bigserious1

lililanny wrote: »

It's PTSB. If I apply for another mortgage with them I'd probably be interested in the tracker portability they are offering. If I went with another bank, I don't then have to disclose that it's a tracker?

Tracker porting will only move the existing balance across and youd have to either sell the btl or move it onto much more expensive rates.

If you apply with another bank they will want to know what rate you are being charged but have no concern with your t&c's with PTSB.

If it was me I'd apply somewhere else to get an idea if it's even a runner. Most banks heavily discount btl income and values. So unless you are getting a low ltv on the new loan they may not be interested

Sunrise_Sunset

Bigserious1 wrote: »

Tracker porting will only move the existing balance across and youd have to either sell the btl or move it onto much more expensive rates.

If you apply with another bank they will want to know what rate you are being charged but have no concern with your t&c's with PTSB.

If it was me I'd apply somewhere else to get an idea if it's even a runner. Most banks heavily discount btl income and values. So unless you are getting a low ltv on the new loan they may not be interested

We are not out of negative equity just yet. Would another bank allow us to get a mortgage based on that? If we did rent out for a short while, and then try to get another mortgage, a different bank wouldn't be concerned that it was being rented? I'm sure they'd see it from the bank statements anyway. So they just want to know the rate, not the T&C's?

Sunrise_Sunset

An update - I rang the bank and they confirmed that I can let out the property, "as long as the mortgage is being paid" and keep the tracker rate of interest. They will send me written confirmation in 3-7 working days.