Rent or sell?

[ashmts]

I think I probably need to speak to an advisor but I'm just looking for advice on what others would do, and what I need to be thinking about.

I bought a flat in 2016 when single. Nice flat, one bed, good location. Now I'm moving in with my boyfriend who owns a house. We had decided to rent the flat and I thought I knew what I needed to do with regards to mortgage lender, landlord registration, letting agency, etc. Just went to request the 'consent to let' form from my mortgage provider and have realised once you let a property you can't change your deal. I currently have a fixed rate so after August 2021 I'd be trapped on the standard variable rate.

It looks like my options are: switch deal now and pay the early repayment charge (which I likely can't afford as an upfront cost although need to speak to Nationwide to check), or let for 18 months and then sell? Which seems a shame as we were hoping to let as a longer term investment. Or do I just sell now? But then that's taking a gamble on my relationship as I lose my safety net.

It just seems such a hassle. I don't understand how anyone manages to make money from rental property.

Are you sure you've understood the consent to let correctly? Would it not be the case that you can't change deals within the fixed term, but after that, ie in August 2021 you could repay the mortgage (once early repayment charges no longer apply) and then apply for a whole new mortgage with another provider, albeit it would have to be a 'proper' BTL mortgage rather than a normal residential one as you have now, which may come at a higher rate? As far as I know (not familiar with nationwide specifically) that is the normal deal, rather than you being stuck on the SVR forever. Worth checking that out with Nationwide, also whether they would let you 'port' the mortgage to a new BTL mortgage now (and not charge an early repayment fee) rather than you waiting until 2021 to do so, if that would be easier.

In general though, yes letting your flat out is a massive hassle and I don't think people do usually make much (if any) money in your circumstances, at least in the short term. In fact you may find you actually have to pay out at least at first, things like agents fees, maintenance, insurance, tax etc. don't come cheap!

Your other option would be to sell now (although do check again whether early repayment charge applies) and keep the equity in an alternative investment such as an ISA in your name - if you choose your product carefully the money should be perfectly safe. Is your concern with doing this that if you and your partner broke up you'd end up priced out of your home area due to house price growth outstripping the interest you'd earn? I can understand if so although obviously there's no way of knowing for sure if it will happen - one way I have heard people deal with this is to invest at least some of their capital in property development firms operating in your area - if house prices rise a lot the firms should make a big profit and you therefore get a good return. Of course if there's a crash you will lose money but if your sole purpose for the money is to be able to rehouse yourself, property prices should then be much lower so you should still be able to do so...

Have you and your partner sorted out what you are doing wrt to the mortgage on his house, are you going to pay 'rent' or contribute to the house in any way (and how is this being recognised if so) and are you going to be continuing to make regular savings in your own name as you will no longer be paying off your own mortgage? I ask because this could be relevant to how you choose to manage the equity you have in your own flat at the moment...

@maxelly

Directly from Nationwide:

'Can I make other changes to my mortgage if I let my property?-

If your property is already let, you can’t take further borrowing, change borrower, change your mortgage term or switch to a new Nationwide deal (unless you're a member of the British Armed Forces or have a critical illness).'

I even phoned to check, although I agree it doesn't sound right. Which is how I must have missed it before now, it's so bizarre. The guy on the phone suggested a BTL but said it would include early repayment charge. However before I make any decisions I'll be speaking to a mortgage/financial advisor to make sure I have all the information and options.

I have £1000 set aside for agency fees, initial tarting up costs and insurance, which I think would cover it. I'm just starting to seriously wonder whether it's worth it. My concern with selling when we were originally talking about moving in was that we'd only been together a year and a half. Now we're 9 months down the line (I've had a big work project that's taken priority) and the relationship is much more established. If we were married I'd put any profit from the sale of the flat into his house (our house I suppose) and we'd hopefully be mortgage-free within a few years. Which I guess might actually be a better investment than a long-term rental property? It's so hard to know, you need a crystal ball.

Initially I'll be contributing towards bills as rent. If it got to the stage where I was paying to enable him to overpay his mortgage we'd probably need to think about legally protecting me or getting married.

Look at other lenders and see about switching once the fixed rate expires. Not very ethical but I suppose you could do this in between letting or worse case scenario give the tenants notice, change the mortgage and re let.

One of the reasons why tenants get such a raw deal is stupid rules like this to profiteer.

'give the tenants notice'.... because then they will definitely leave....

There is a strong chance that they won't. And certainly not if they want a council place.

have you done the actual sums? All the insurances, (buildings, contents, malicious damage, legal, rent guarantee), fees (none of which tenants now pay), funding for fixes, cover for voids?

I am not sure I have understood the issue. The way I read it, Nationwide are saying they won't change your mortgage, but that just means when the fixed rate is up you apply for a BTL remortgage with another provider, same as when fixed rate on residential comes to an end.

I rent out a property and when my current fixed rate expires I will move to another fixed rate with whichever lender is the best.

Work out the yield on the flat to decide if its worth it. I think anything below 5% is too little return but that is personal preference.

I don’t think there’s an issue here. You would usually change your mortgage to a different provider if you were on the standard rate. You are perfectly free to do so.

I've now spoken to four different members of Nationwide staff. Two have told me I can't change deal once let (explicitly stating that once let there is no way to come off the SVR at the end of my fixed rate) and two have told me I can. I'm getting incredibly frustrated. Think I might put in a complaint.

You can change your mortgage deal at the end of your fixed term.

Is your mortgage not a buy-to-let mortgage then?

Our buy-to-let mortgage is fixed for a certain length of time, e.g. 2 or 5 years, then you can either let it continue at the higher rate, or go for another fixed rate term with the same or new lender. It costs an extra fee at the beginning of each set rate period, often £999 or £1,999.

They are talking rubbish. Once you’re out of the deal they can’t stop you repaying and leaving.

We became accidental landlords a few years ago. We took consent to let for 4ish yrs (we were on a great tracker rate and our lender let us renew the original 2yr consent) before remortgaging to a BTL. I don't think nationwide do BTL? So it may be that they are saying you can't with them?

Incidentally we've since bought another house to live in and are likely to sell the rental this year. It's not the type of house you'd buy as a rental so the return is only about 2.7%. After upkeep and maintenance plus taxes (We're both higher rate) it's just not worth it - especially as we are effectively paying interest on the equity in it which could pay off our mortgage here. I think we're about £2k up a year. With the market so flat we've run out of reasons to keep it.

I changed mine to consent to let for 2 years until the 5 year fixed deal ran out then swapped mortgage companies and got a BTL without difficultly.