Is renting your home an option whilst in mortgage arrears?

Mortgage arrears can make the pressure of keeping up with payments while managing other financial responsibilities really overwhelming. However, there are several strategies to consider that might help ease the pain, one of which is renting out your property. Obviously this can only be an option if you have somewhere else to live, perhaps with your parents, siblings or a friend.

Renting out your property can provide a steady income stream that can be used to cover mortgage payments and help offset your mortgage arrears if your property’s rental value is higher than your monthly mortgage payments, allowing you to not only cover the arrears but also possibly save a little extra each month.

Before deciding to rent out your home, there are several important factors to consider. First, you’ll need to check with your mortgage lender. Most lenders require homeowners to seek permission before renting out their property, as it can affect the terms of your mortgage. In some cases, your lender may grant consent to let, which formalises your ability to rent out the property without breaching your mortgage agreement.

Additionally, you should assess the rental market in your area. Understanding the demand for rental properties and the going rental rates will help you set a competitive price and ensure you attract tenants quickly. It might also be worthwhile to consult a local letting agent who can provide valuable insights and assist with the rental process.

Once you’ve decided to rent out your home, you’ll need to prepare it for tenants. This involves ensuring that the property meets safety standards and is in good condition. You might need to invest in some repairs or improvements to make it more appealing to potential renters. It’s also essential to comply with legal requirements, such as obtaining a gas safety certificate, installing smoke alarms, and ensuring that the property is energy efficient.

Managing a rental property comes with its own set of responsibilities. If you’re not prepared to handle these duties yourself, you might consider hiring a property management company. They can take care of everything from finding tenants and collecting rent to handling maintenance issues and ensuring compliance with regulations. While this will incur additional costs, it can significantly reduce the stress and time commitment involved in being a landlord.

One of the key benefits of renting out your property is the potential tax relief on your mortgage interest payments. In the UK, you can offset the interest portion of your mortgage against your rental income, reducing your overall tax liability. However, tax laws can be complex, so it’s advisable to seek advice from a tax professional to ensure you’re making the most of any available relief.

It’s also important to have a contingency plan in place. The rental market can be unpredictable, and there may be periods when your property is vacant and rental income is not guaranteed. Building a financial buffer can help you manage during these times and ensure you can continue to meet your mortgage obligations.

So renting out your home may be a viable option if you are in mortgage arrears. It can provide a much-needed income stream to help manage to avoid repossession. However, it’s important to approach this decision carefully, considering all legal, financial and practical aspects involved. By doing so, you can turn a challenging situation into an opportunity to regain financial stability and peace of mind.

Got a question? Click here and reach out!