Category: Buy To Let

If you’re moving away for work, travel, or to live with a partner, renting out your house can help you generate extra income to repay your mortgage while you’re gone.

But is it possible to rent out your house on a normal mortgage, or will you need to change it? Read on to find out.

Renting Out Your House On A Normal Mortgage

Whether or not you can rent out your house on a regular mortgage will depend on your lender and how long you wish to rent it out.

You must inform your lender that you want to let and get permission or consent to let on your current residential mortgage.

If your lender doesn’t allow it or has strict occupancy requirements, you may not be able to rent your house out on a residential mortgage.

The lender can only permit you to rent out temporarily or for a limited period.

If you want to rent out permanently or the lender doesn’t consent, you’ll need to switch to a buy-to-let mortgage.

Check Today's Best Rates >

How Does Consent To Let Work?

Consent to let simply refers to permission from a mortgage lender to let out a property.

If the lender gives consent, it means they’re okay if you rent your house out while on your residential mortgage.

However, consent to let only lasts for a limited period, usually 6 to 12 months.

Consent to let is only suitable if you want to rent out your house for a short term.

For example, you want to move in with your partner but need to determine if you can live with them before selling your house.

With consent to let, you can rent your house while deciding whether you’ll move back in or go ahead and sell.

It can also be suitable if you want to travel for a few months and get extra income from the house to help pay the mortgage when you’re gone.

Having consent to let will be easier than switching to a buy-to-let mortgage and then reverting to the residential mortgage when you return.

Considerations When Seeking Consent To Let

Some of the factors lenders consider when deciding to grant your consent to let request include:

Income

A minimum income may be necessary to get permission to let. Some lenders will not consent to let if you’re not earning above a certain amount.

They may also require that the rental income from the property can easily cover the cost of mortgage repayments.

Equity

The lender may require that you have a certain amount of equity in your property.

Equity is how much of the property you own outright or simply how much cash you would be left with if you sold your house and paid off the mortgage.

A lender may require that you build up a decent amount of equity, like 25% of the house value, before granting consent to let.

Mortgage Length

Some lenders won’t grant consent to let unless you’ve been with them for a while.

It may be challenging to get consent to let if you’ve held your current mortgage for less than six months, with some lenders setting a minimum mortgage length of 12 months.

Shared Ownership or Help to Buy

Getting consent to let can be harder if you’re on a shared ownership or Help to Buy mortgage.

The schemes usually have strict criteria for letting the property and may even require that the government loan or shared ownership is paid off before converting to other mortgage types.

Cost of Renting Out Your House On A Normal Mortgage

Although some lenders can grant you consent to let with no additional charge and keep the terms of your original deal the same, most will set a charge for the permission.

It can be an admin or a fixed fee, or you may have to pay higher interest rates.

You must also consider other landlord costs, including energy performance and gas safety certificates and ensure your property meets fire safety regulations.

It’s wise to ensure that your rental income can cover all the costs plus your mortgage repayments.

Check Today's Best Rates >

Must I Tell My Lender I’m Renting Out My House?

Yes. If you let out your house without the proper consent from your mortgage lender, you’ll be breaching the terms of your mortgage contract.

Living in the property is usually part of the mortgage conditions if you purchase a house on a residential mortgage.

Occupying it personally presents less risk than using it as an investment property or renting it out.

As a result, most owner-occupied mortgages require a lower down payment, offer lower interest rates and are easier to qualify for.

You may be accused of occupancy or mortgage fraud if you don’t tell the lender you’re renting out the property, which can have serious consequences.

The lender can demand immediate repayment of the entire loan or repossess the property. Although it doesn’t often happen, the lender would be within their rights to do so.

Most lenders settle on a change in terms with financial penalties like additional interest on top of the current one, regular additional payments or backdated payments on extra interest demanded for the period you were letting.

The consequences are not worth the risk, so it’s better to inform the lender and seek consent, and even if they refuse, you can simply switch to a buy-to-let mortgage.

Switch To A Buy To Let Mortgage To Rent Out Your House

If you don’t get permission or want to be a permanent landlord, you can switch to a buy-to-let deal with your current provider or remortgage onto a new deal with a different lender.

It will allow you to rent out your house for as long as you want, but it usually requires extra checks and assessments to ensure you can afford the buy-to-let mortgage.

In addition to assessing your affordability, lenders will require that the future rental income is at least 125% of the mortgage payments before agreeing to switch.

Check Today's Best Rates >

Can I Rent My House Out On A Normal Mortgage? Final Thoughts

You’ll need to inform your mortgage provider and get consent to let if you want to rent your house out on a normal mortgage.

You can be liable for mortgage fraud if you don’t get permission.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

If you’re moving away for work, travel, or to live with a partner, renting out your house can help you generate extra income to repay your mortgage while you’re gone.

But is it possible to rent out your house on a normal mortgage, or will you need to change it? Read on to find out.

Renting Out Your House On A Normal Mortgage

Whether or not you can rent out your house on a regular mortgage will depend on your lender and how long you wish to rent it out.

You must inform your lender that you want to let and get permission or consent to let on your current residential mortgage.

If your lender doesn’t allow it or has strict occupancy requirements, you may not be able to rent your house out on a residential mortgage.

The lender can only permit you to rent out temporarily or for a limited period.

If you want to rent out permanently or the lender doesn’t consent, you’ll need to switch to a buy-to-let mortgage.

Check Today's Best Rates >

How Does Consent To Let Work?

Consent to let simply refers to permission from a mortgage lender to let out a property.

If the lender gives consent, it means they’re okay if you rent your house out while on your residential mortgage.

However, consent to let only lasts for a limited period, usually 6 to 12 months.

Consent to let is only suitable if you want to rent out your house for a short term.

For example, you want to move in with your partner but need to determine if you can live with them before selling your house.

With consent to let, you can rent your house while deciding whether you’ll move back in or go ahead and sell.

It can also be suitable if you want to travel for a few months and get extra income from the house to help pay the mortgage when you’re gone.

Having consent to let will be easier than switching to a buy-to-let mortgage and then reverting to the residential mortgage when you return.

Considerations When Seeking Consent To Let

Some of the factors lenders consider when deciding to grant your consent to let request include:

Income

A minimum income may be necessary to get permission to let. Some lenders will not consent to let if you’re not earning above a certain amount.

They may also require that the rental income from the property can easily cover the cost of mortgage repayments.

Equity

The lender may require that you have a certain amount of equity in your property.

Equity is how much of the property you own outright or simply how much cash you would be left with if you sold your house and paid off the mortgage.

A lender may require that you build up a decent amount of equity, like 25% of the house value, before granting consent to let.

Mortgage Length

Some lenders won’t grant consent to let unless you’ve been with them for a while.

It may be challenging to get consent to let if you’ve held your current mortgage for less than six months, with some lenders setting a minimum mortgage length of 12 months.

Shared Ownership or Help to Buy

Getting consent to let can be harder if you’re on a shared ownership or Help to Buy mortgage.

The schemes usually have strict criteria for letting the property and may even require that the government loan or shared ownership is paid off before converting to other mortgage types.

Cost of Renting Out Your House On A Normal Mortgage

Although some lenders can grant you consent to let with no additional charge and keep the terms of your original deal the same, most will set a charge for the permission.

It can be an admin or a fixed fee, or you may have to pay higher interest rates.

You must also consider other landlord costs, including energy performance and gas safety certificates and ensure your property meets fire safety regulations.

It’s wise to ensure that your rental income can cover all the costs plus your mortgage repayments.

Check Today's Best Rates >

Must I Tell My Lender I’m Renting Out My House?

Yes. If you let out your house without the proper consent from your mortgage lender, you’ll be breaching the terms of your mortgage contract.

Living in the property is usually part of the mortgage conditions if you purchase a house on a residential mortgage.

Occupying it personally presents less risk than using it as an investment property or renting it out.

As a result, most owner-occupied mortgages require a lower down payment, offer lower interest rates and are easier to qualify for.

You may be accused of occupancy or mortgage fraud if you don’t tell the lender you’re renting out the property, which can have serious consequences.

The lender can demand immediate repayment of the entire loan or repossess the property. Although it doesn’t often happen, the lender would be within their rights to do so.

Most lenders settle on a change in terms with financial penalties like additional interest on top of the current one, regular additional payments or backdated payments on extra interest demanded for the period you were letting.

The consequences are not worth the risk, so it’s better to inform the lender and seek consent, and even if they refuse, you can simply switch to a buy-to-let mortgage.

Switch To A Buy To Let Mortgage To Rent Out Your House

If you don’t get permission or want to be a permanent landlord, you can switch to a buy-to-let deal with your current provider or remortgage onto a new deal with a different lender.

It will allow you to rent out your house for as long as you want, but it usually requires extra checks and assessments to ensure you can afford the buy-to-let mortgage.

In addition to assessing your affordability, lenders will require that the future rental income is at least 125% of the mortgage payments before agreeing to switch.

Check Today's Best Rates >

Can I Rent My House Out On A Normal Mortgage? Final Thoughts

You’ll need to inform your mortgage provider and get consent to let if you want to rent your house out on a normal mortgage.

You can be liable for mortgage fraud if you don’t get permission.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

A holiday home is an excellent investment that can give you significant returns when you’re not using it.

Regular mortgages aren’t suitable for holiday homes, so if you’re looking to buy a home you can rent out throughout the year or during holidays, you’ll need a holiday let mortgage.

Arranging one yourself can be challenging, and it’s wise to work with holiday let mortgage brokers to find the best deals.

Here’s everything you need to know about holiday let mortgages and why you should work with a broker.

What Is A Holiday Let Mortgage?

Holiday let mortgages are specific loans designed to help you buy a property you can let out to visitors and tourists on a short-term basis.

They’re purely for long-term lettings and not for you to live in. If you want a holiday home to stay in and not let, a second home mortgage is more suitable.

Holiday let properties give you the opportunity for business and pleasure since you can still enjoy short visits.

The property must be advertised as furnished accommodation and be available as holiday accommodation at least 210 days a year.

You can stay in the home outside the 210 days when it must be open to the public.

Like regular mortgages, you can get a holiday let mortgage on a repayment or interest-only basis.

The investment allows you to generate enough rental income to repay the mortgage and make profits every month.

You can also use the revenue to improve and maintain the holiday home.

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Can You Use A But To Let Mortgage For Holiday Lets?

No. Buy-to-let properties differ from holiday homes, and lenders are very aware of the differences, so they offer different mortgages for each.

Buy-to-let properties are usually let out long-term, and the shortest tenancy can be six months. In contrast, holiday homes are typically rented for a few weeks or even days.

Although they both charge rental frees, they’re operated entirely differently, and the owners or landlords can have varying responsibilities.

A holiday home is usually furnished and can feature serviced accommodation like a hotel. Holiday homes are also priced higher and are charged per day instead of per month.

The income generated is potentially higher for a holiday home than for a buy-to-let, but the occupancy rate is usually much lower.

Tax Relief On Holiday Lets

Unlike general buy-to-let investments, you’ll get tax benefits when you invest in a holiday let.

Furnished holiday homes are considered a business, allowing you to claim tax relief on your mortgage interest.

Since you’re running a holiday home business, you can deduct expenses from your income and significantly reduce your tax liability.

You can also gain capital gains tax relief for traders by renting out your furnished holiday home, including entrepreneurs’ relief when selling the property.

You’ll also be eligible for allowances for fittings and furniture, and if you make a loss in the business, you can offset it against future profits and pay less tax.

You can make huge savings, and your profits in the holiday let business can also count as earnings for pension purposes.

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Why You Should Work With Holiday Let Mortgage Brokers

The holiday let mortgage lending market is small, and most high street lenders don’t offer mortgages for holiday homes.

They’re usually more challenging to arrange than standard property mortgages because there’s no assured shorthold tenancy, and the rental income cannot be calculated through standard criteria.

You can approach a holiday let mortgage lender personally, but it’s better to use a specialist holiday let mortgage broker because the application process is more complex.

Such brokers have an in-depth understanding and knowledge of the lending criteria, together with expertise on the market and where to find the best deals.

Some lenders only offer holiday let mortgages through intermediaries, meaning they’ll only lend if a broker or advisor has arranged the deal.

Brokers understand the complexities in the market and have a close working relationship with holiday let mortgage lenders.

They can help you navigate any unforeseen issues along the way, keep you up to date with the latest criteria, find the best deals and submit credible applications that increase your chances of securing the best deal for a holiday let mortgage.

Holiday Let Mortgage Lending Criteria

Since there are limited lenders in the market willing to offer holiday let mortgages, pinning down the lending criteria can be challenging, which is why consulting a qualified broker or advisor is essential.

Different lenders can have slightly different rules, but some common things to consider include the following:

Deposit

The deposit you need will be based on the lender’s maximum loan-to-value (LTV) ratio.

Most lenders will set an LTV of 70%, meaning you’ll need a minimum deposit of 30% of the property value.

Some can require a deposit of 35% to 40%, while others accept a 25% deposit in rare cases.

Unlike regular mortgages, deposits for a holiday let mortgage are higher because of the risks involved.

Like any other business, there’s no guarantee of success when letting out a holiday home, and the risk is higher if you only rely on the income from the holiday let to repay the mortgage.

Rental Income

Lenders will request details of your holiday let and expect you to estimate how much you’ll earn in rental income.

This will give lenders an idea of how much you’ll earn from the investment and set applicable rates.

Most lenders require that you achieve a gross rental income of 125% to 145% of the monthly mortgage repayments.

Personal Circumstances

Most holiday let mortgage lenders will require that you own a home and be 21 years of age or older.

They’ll also determine your affordability based on your income and outgoings.

Significant existing outgoings can make approval difficult even if you have a sizeable income because they’ll affect your mortgage affordability.

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Holiday Let Mortgage Brokers Final Thoughts

The holiday let mortgage market is a niche area that requires specialist expertise and knowledge to navigate.

Working with a holiday let mortgage broker can ensure you get the proper guidance and advice, give you access to a fair deal and make the process as stress-free as possible.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

Many people choose to subdivide their houses into flats because of the lucrative opportunity it offers and the potential to secure a steady monthly rent.

In fact, the demand for flats is especially high in London, and property owners can make the most out of the income they receive from the flat rentals and their profits when selling the properties.

If you don’t know where and how to start, keep reading!

We detail all the basics of converting your house into flats in the UK.

Carry Out Property Market Research

Before you renovate an existing property into flats for multiple occupants, you must ensure there will be a market for your new rental units.

There is no better way to guarantee a successful renovation project than by researching the rental market in your chosen area to ensure that you’re creating something that will actually be in demand.

The real estate market is constantly shifting and changing, so it’s important to research and consider all your options to get the best return on your investment.

When considering converting your home into flats for rental, be sure to do thorough research into local neighbourhoods and properties.

Pay special attention to the more popular areas with higher demand: these neighbourhoods will generally command higher prices and attract more qualified renters.

It’s always best to take proactive steps to ensure you gain the best return on investment (ROI) possible.

Do your homework to find out if anyone is buying the type of property you want to purchase.

If three-bedroom properties are slow to sell in your area compared to smaller property types, conversion may be the better choice.

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Consider the Implications Around Planning

After finding the perfect house and the right area, you’ll need to contact the local planning authority.

You’ll need planning permission to make this conversion, and once you’ve received the go-ahead, you’ll need to apply for Building Regulations.

Before you buy your intended house, intending to split it into a flat, find out if the local planning department has any rules or regulations that could affect its resale value.

For example, certain neighbourhoods have additional rules to follow typical regulations, such as the minimum size of flats, the number and position of entrance doors, insulation for energy efficiency and comfort, soundproofing between adjoining flats, fire safety and so on.

Another key factor might be the availability and access to parking.

Before beginning any renovation project, contact the local building control authority.

You will also need to consult a solicitor to see if legal restrictions could prevent your renovations from going ahead.

If you are taking out a mortgage to buy the home, your bank must also be involved in your plans.

Some banks are more accommodating to landlords with loans designed to help with development projects, while others are not.

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You have done the research and confirmed a high demand for apartments in the area.

You have also made sure that your plans comply with all the regulations.

An estate agent has also help you determine whether the property is a good candidate for flat conversions.

A good relationship with an estate agent is the best way to go when it comes to attracting high-quality tenants.

As you plan your strategy, keep these considerations in mind:

• Size of the flat.
• Big ticket items.
• Flat layout design.
• Ease of access (each flat must have a private entrance).
• Services offered for each flat.

The Impact on Your Tax

Converting your house into apartments will impact your taxation.

Make sure you check your taxes carefully. If you plan to sell the apartment, your profits will be taxed.

You can claim the Private Residence Exemption as things stand, but this may change.

Converting a property into multiple units can be a great way to make money. But, before doing so, it is important to understand the tax implications.

Tax authorities will take into account the cost of buying the property and the money spent making conversions.

Therefore, it is important to get good tax advice, as you could be liable to pay income tax and, in some cases, capital gains tax.

The Overall Costs of a Project

The costs of converting a property will vary significantly from project to project.

The size and layout of the property, the design, the condition, the number of rooms, and the type of heating will all impact the final price.

However, as a very rough estimate, you can expect to pay £25,000 for a basic conversion, which includes building the walls, installing the bathrooms, and adding the central heating.

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You will also need to contact the utility companies, as each flat will require gas, electricity and water meters dedicated to just that unit.

You should budget for the following:

• Planning approval costs.
• Provision of new water, electric and gas meters.
• Noise pollution tests.
• Building regulation approval costs.
• The installation of new kitchens and bathrooms.
• Installation of entrances.
• Décor and cosmetic improvements of new flats.

Financing of the Conversion

You can fund your conversion project in several ways as follows:

• Development finance – this is usually required when extensive work is needed to convert the property. You can loan up to 65% of the property’s value and 100% of the construction work.
• Bridging finance – these are short-term loans usually paid back over 1 year. These loans usually provide up to 75% of the property value.
• Buy to Let mortgages are great for simple conversions where the owner will not stay in the property at the end.

Converting a House into Flats Last Word

Converting a house into flats may be a highly lucrative step for you, but make sure that you consult with a reputable and reliable mortgage broker before taking the plunge.

It’s best to be informed before taking such a big financial step.

With recent tax changes, more and more landlords in the UK are buying properties through limited buy-to-let companies rather than ‘as individuals.’

But is it the best option for you?

Mortgaging your property through a limited company can be beneficial whether you’re buying your first investment property or are an established landlord looking to add to your portfolio.

This guide explores the pros and cons of buying property through limited companies and how you can easily set up a limited company.

What Is A Limited Company Buy To Let Mortgage?

Buy to let limited company mortgages, also called special purpose vehicle (SPV) mortgages, allow you to take out mortgages on properties through a limited company rather than in your name.

The legal structure of limited companies separates the responsibilities of business owners and the business itself.

When incorporated, a limited company becomes a legal entity with debts and assets.

The main benefit of purchasing a buy to let property this way is tax-related.

You also get a safety net of limited liability when things go wrong, and you can share property ownership.

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Pros Of Buying A Buy To Let Property Through A Limited Company

Tax Benefits

When you buy property as an individual, you’re liable to pay income tax on your rental income.

The tax authority of the UK government views the money you receive for rent as personal income.

The rental income is added to your personal income, pushing you over a new income tax band threshold that makes you liable to higher taxes.

You’re not taxed according to personal income tax rates when you purchase your buy to let property as a limited company.

You’ll be subject to corporation tax rather than income tax, enabling you to pay less tax. The current rate stands at 19% for the 2021-22 tax year, and there are no higher tiers like income tax.

Claim Back Your Expenses

Landlords used to pay less on their rental income before 2017 by claiming tax reliefs that allowed them to subtract certain costs from the income first, like the cost of their mortgage interest.

Higher-rate taxpayers could offset their interest as a tax expense and avoid paying up to 45% tax on the value of their annual interest. However, things have changed.

As of April 2020, you must pay tax on your rental income straight away without deducting any costs.

After that, you can only claim back the equivalent of 20% of your mortgage interest cost.

However, these changes will not affect you if you own a buy to let property through a limited company.

You can still deduct such expenses from the income of a limited company as business expenses, and it can help reduce the amount you’re taxed.

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Plan For The Future Easily

It’s essential to think about the future when investing in a buy to let property, including what you plan to do with it in later life.

It’s easier to transfer ownership of your rental properties through a limited company.

It’s simpler and more tax-efficient to transfer ownership of the limited company instead of passing on privately held property.

The property remains in the ownership of the limited company, and only the company’s directorship changes hands.

As a result, you protect the transaction from being subject to Stamp Duty, Capital Gains Tax and Inheritance Tax.

It’s a suitable plan if you plan to pass a buy to let property to family members in the future.

Protect Your Earnings And Assets

You’re not making a capital gain if you sell any buy to let property you own through a limited company.

Your business is making a profit. You’re protected from tax liabilities when you retain profits within the company, helping you keep more of your earnings.

Limited companies provide limited liabilities if anything goes wrong with the new property investment.

If it becomes difficult to pay your mortgages, your other assets remain protected from the lenders as long as you hold them outside the company’s investments.

However, it doesn’t absolve you from any personal guarantees often required by mortgage lenders.

Cons Of Buying A Buy To Let Property Through A Limited Company

Additional Costs

You’ll face some new costs in running a company when you set up a limited company and use it to purchase a property. You’ll need funds for:

• Corporation tax.
• Preparing and filing annual accounts at Companies House.
• Keeping accurate financial records throughout the year.
• Accountancy fees or annual auditing, if required.
• Legal fees.

No Capital Gains Tax Allowance

Individuals who sell buy to let properties get a Capital Gains Tax allowance of £12,300 for the 2021-22 tax year.

If you receive any profits from selling a buy to let property as an individual, you’ll not be taxed on the first £12,300.

However, it doesn’t apply to limited companies. Limited companies are subject to Corporation Tax from profits in the business, and you’ll pay tax on the entirety of the profit.

Increased Mortgage Rates

Many lenders charge higher interest rates for the privilege of taking out a mortgage through a limited company.

You’ll have fewer choices in lenders and mortgage availability since lending money to companies is riskier than individuals because of the limited liability.

Setting Up A Limited Company For Property Purchases

Setting up a limited company is easier than you might expect. Simply register online with Companies House for as little as £12.

Important things you’ll need when registering a limited company include:

• Company name and address.
• Directors and shareholders.
• Definition of business activity like buying and selling own real estate or managing real estate.

Always consult qualified accountants or tax advisers about the type of company you’re creating and whether it should be a special purpose vehicle.

Don’t forget to register for Corporation Tax within three months and set up a business bank account.

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Final Thoughts

Whether you should purchase a buy to let as an individual or a limited company will ultimately depend on your circumstances and what you’re looking to get out of a buy to let.

Every situation is unique so ensure you consult qualified financial advisers, accountants or solicitors to help make the best decision for you.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

As a new landlord, you must register for self-assessment with Her Majesty’s Revenue Commission (HMRC) and file a tax return.

Before you start, it’s worth understanding the rental income tax and landlord taxes rules.

This guide will explore why you pay rental income tax and landlord taxes, pay rates, allowable expenses, and tax relief considerations.

Why You Pay Tax On Rental Income

Becoming a landlord on a buy-to-let property counts as running a business.

The rental income you receive from tenants is an ongoing source of income, and you’ll pay tax like any other monthly earning.

It’s sometimes called property income tax, landlord income tax, or buy to let income tax.

You’ll pay tax on your net rental income as a landlord, which is the profit you make from your rental property.

You can calculate it by adding rental income from your properties and subtracting any rental income tax relief, allowances, or allowable expenses.

Rental income can include money for:

• Rent.
• Heating.
• Repairs.
• Furniture usage.
• Cleaning of communal areas.
• Hot water.

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Rental Income Tax Rates In The UK

The tax amount you pay will depend on your profit and how much income you receive from other sources like your job or pension.

The taxation thresholds and bands for rental income are the same as those for other forms of income like personal income.

However, you may push your usual tax threshold into a new, higher tax band when you add your rental income into any other income you receive.

You need to be careful and precise when calculating your income to determine how much tax is due.

You can expect the following income tax rates:

Income Tax Band	Taxable Income UK 2021-2022	Income Tax Rate UK 2021-2022
Personal Allowance	Up to £12,570	0%
Basic Rate Tax	£12,571- £50,270	20%
Higher Rate Tax	£50,271 – £150,000	40%
Additional Rate	£150,001 and above	45%

 

• You’ll pay 0% in tax if your income is less than the basic rate threshold of £12,570.
• You’ll pay 20% in tax if your income is above £12,570 but below the higher rate threshold of £50,270.
• You’ll pay 40% tax if your income is above £50,270 but below the additional threshold of £150,000.
• You’ll pay 45% tax if your income is above the additional rate threshold of £150,000.

Calculating Your Income Tax Band
To figure out your income tax band:

• Determine your annual salary if you earn one, including bonuses or overtime, and don’t deduct the personal allowance of £12,570.
• Deduct any allowable expenses or property allowance from the total rental income to get the net rental income.
• Add your salary, net rental income, and other net income to get the marginal income tax band.

For example, let’s assume you earn a £40,000 salary, receive £20,000 in rental income, and incur deductible expenses of £5,000.

Your net rental income is £20,000 – £5,000 = £15,000.

When you add your net rental income to your salary, you get your income tax band; £15,000 + £40,000 = £55,000.

Therefore, you fall within the higher tax band.

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When Should You report Rental Property Income?

If your total rental income is over £10,000 before expenses or £2,500 after expenses, you’ll need to file a tax return.

You should contact HMRC if your rental income is less than £2,500, as they may collect your payment through PAYE.

Landlord Tax Returns

HMRC uses self-assessment tax returns to collect income tax if you receive income from sources other than your salary, like income from rent.

The tax year runs from 6^th April to 5^th April the following year, and the deadlines for paying tax are the same as filing your tax return.

Ensure you keep any receipts from work done on your property to claim any expenses when completing a tax return.

Completing The Self-Assessment As A Landlord

Landlords can complete self-assessments in two ways:

• Fill Out The Tax Return Yourself

You can choose to fill out the tax return yourself and eliminate any accountant costs.

You can’t avoid landlord taxes even if you file the returns yourself so ensure you’re honest and thorough when completing your self-assessment.

• Employ An Accountant To Self-Assess On Your Behalf

If you don’t know how to file rental income on your taxes or you don’t feel confident filing your tax returns, you can benefit from engaging an accountant.

They can also help if your tax affairs are complex, where you may have more than one property, additional income sources, or rent out your property through a limited company.

It’s advisable to get an accountant with property taxation experience.

They’ll know how rental is taxed and the rules about taxation on rental income, the expenses you can claim, and the receipts you should keep.

Allowable Expenses And Tax Relief

Property Allowance

Property allowance is the first £1,000 you receive in rent from your tenants and its tax-free rental income.

If you’re a landlord who earns less than £1,000, you’ll receive total tax relief on your rental income and don’t have to worry about calculating expenses and reporting them to the HMRC.

Deductible Expenses

Claiming tax relief on expenses of renting out property can help you reduce your tax bill.

They’re the costs you incur when running the tenancy, and they’re expenses that you, not the tenant, pay for.

They include:

• Management and letting agent fees.
• Accountant fees.
• General maintenance and necessary repairs.
• Landlord insurance on buildings, contents, and public liability.
• Ground rent and service charges.
• Direct costs like stationery, business calls, and advertisements.
• Legal fees.

Landlords could previously claim the interest on their mortgage, and it was beneficial for higher rate taxpayers.

However, with new rules that came into effect in April 2020, you can no longer make this claim.

Instead, you receive a tax credit based on 20% of your mortgage interest payments.

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Final Thoughts

Be wary of tips on avoiding rental income tax and landlord taxes as they’re usually very risky and unreliable.

Becoming a landlord can be very lucrative, but it can be intimidating because you pay taxes specifically.

It’s better to stay aware of the tax allowances that suit your circumstances and discuss tax efficiencies with a qualified accountant.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

You’ll need a deposit for a second property mortgage when you’re in the market for a second home.

Most lenders will see you as a lesser risk and more valuable borrower since you already have one property under your belt.

However, a second home deposit will usually be higher than a first property mortgage because having more than one mortgage increases the risks involved. Read on for expert advice on the deposit required for a second home.

How Much Deposit Do I need for a Second Home Mortgage?

The amount of deposit you’ll need for a second home will vary depending on the lender and your circumstances.

While some will only consider the amount you can put up as a deposit, others will consider the amount of equity you have in your current home or both.

Other factors that can influence the amount of deposit you need include:

• Your creditworthiness.
• How you’ve handled your existing mortgage.
• The mortgage type.
• Lenders will consider your income and expenditure when calculating affordability.
• The type of property you’re eyeing and whether it’s standard or non-standard.

A 20% deposit is usually the standard for attractive mortgages with attractive rates and terms.

Most lenders will only offer deals with 80% loan to value (LTV) for second mortgages.

You may need a higher deposit depending on the type of property.

You’ll require a higher deposit if the lender considers the property a higher risk. If the property is a higher risk, they may set restrictions to 85%, 80%, 75%, or 70% LTV.

Need more information? Read our related quick help guides: 

• Portfolio mortgages.
• Converting residential mortgages to buy to let.
• Buy to let remortgages.
• Buy to let mortgages with bad credit.
• Buy to let guide.
• Can I buy a house and rent it to a family member? 

Can I Get a Second Mortgage with a 10% Deposit?

Theoretically, it’s possible to get a second home mortgage with a 90% LTV, requiring a 10% deposit. However, it’s tough. Your choice of lenders will be limited since most cap the loan to value they can accept at 80% or 75%.

Some lenders can stretch up to 85% under the right circumstances, while a minority can reach 90% and up. Having significant equity in your first property and meeting all the lenders’ affordability and eligibility criteria requirements can increase your chances of getting a higher loan to value ratio.

However, higher LTVs for second mortgages will usually attract higher interest rates, translating to a higher repayment. A higher deposit amount is more suitable, and the deal gets better every time you go higher by 5%, so aim for 15% to 20% deposit milestones or higher.

Using Equity as a Deposit for a Second Home

You can also remortgage your first property t0 get the funds needed for a deposit for your second home. You can release the equity you hold in your first property and use the funds to finance the deposit necessary for a second home mortgage.

A second charge is another option to consider if you don’t want to remortgage your first home. It’s usually a better solution if you’re looking to release the highest amount of equity possible.

You must meet the requirements and eligibility criteria of the lender and ensure you have enough equity in your home whether you choose to remortgage or take out a second charge. It’s wise to consult a qualified advisor in any of these cases because it involves having more than one mortgage at the same time.

Check Today's Best Rates >

How Affordability Influences Deposit

Affordability is vital when you apply for a second mortgage, and it’s usually calculated by considering your monthly income and expenditure. Lenders are generally willing to advance you up to four or five times your income.

The maximum amount a lender can offer can also be based on assessing your outgoings, including how much you’re paying on your current mortgage and other obligations like credit card debt and loan payments. Such assessments provide a clear picture of how much disposable income you have.

For example, if you can get a £150,000 mortgage but the property you’re eyeing is going for £200,000, then you’ll need to come up with a £50,000 deposit. It would translate to an 80% LTV mortgage, which requires a 20% deposit.

A different lender may even advance a lower amount depending on the LTV ratio they accept, meaning you’ll need a higher deposit. It’s recommended that you shop around to get the best deal with the highest savings.

Affordability is easier when you’re looking to purchase a buy to let property that can generate rental income. Your affordability improves with the potential rental income that you can use to repay the second mortgage.

How Will Bad Credit Affect Deposit?

Your credit score impacts your eligibility when applying for any type of credit. Although it’s not a deal-breaker, a bad credit score will affect how much interest rate is available for you and the amount of deposit you’ll need for a second mortgage.

Some lenders may decline you if you have severe credit issues like bankruptcy or a CCJ, while others may be more welcoming. It’s worth consulting mortgage advisors and brokers who have access to the whole market and can connect you with mortgage lenders who specialise in helping bad credit borrowers.

You’ll likely need to come up with a higher deposit than usual if you have a bad credit score. You can still get a good deal depending on when the credit issue occurred, your current financial situation and the LTV on your current property.

To ensure you get the best possible deal and don’t get too many rejections, ensure you get professional advice before making your application.

Check Today's Best Rates >

How the Property Type Affects Deposit

You’ll fund different policies among lenders depending on the property type. Specific residential categories usually present more challenges than others when buying a second home.

Lenders may need you to provide a higher deposit based on the property you’re buying. The higher the risk the lender considers the property to be, the higher the deposit needed.

For example, you may face certain restrictions if you need a second mortgage for new build homes. The lender may require a certain deposit amount or have particular builders or construction firms they prefer to work with.

You may also face additional challenges in your second mortgage application if the property involves non-standard construction like:

• Above commercial properties.
• Ex local authority
• Homes with unusual construction like concrete pre-fabs or thatched roofs
• Very high-rise apartments or studio flats
• Use of hazardous materials like asbestos in construction

It may be hard to access the most affordable second mortgage deals with such properties, translating to a higher deposit or interest rate.

Can I Get a Second Mortgage with Zero Deposit?

Most lenders will be reluctant to provide a zero deposit or 100% LTV mortgage of any kind because of the levels of risk involved. However, it’s not impossible under the right circumstances.

You can get a second mortgage with no deposit by incorporating a guarantor in your application. The guarantor can be a responsible person in your life, like a friend or family member with a good credit score and stable finances.

When you incorporate a guarantor, they also become responsible for repaying the loan. They effectively agree to repay when you default or are unable to make repayments, effectively guaranteeing the mortgage and reducing the risk for the lender.

The guarantor may be required to put up their property as security or deposit a lump sum into an account held by the lender. The deposit can only be withdrawn after a certain amount of the mortgage has been paid off.

Deposit Required for a Second Home Final Thoughts

Putting a mortgage deposit can be challenging, especially if you’re already repaying another mortgage.

Therefore, it’s wise to ensure you get the best deal possible that can save you money, and you can do this by consulting with expert mortgage advisors and brokers.

Call us today on 01925 906 210 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Embarking on the purchase of a second home is an exciting step, but it comes with its own set of financial considerations, primarily the required deposit.

When you’re ready to expand your property portfolio, understanding the deposit dynamics for a second property mortgage is crucial.

Lenders often view those who already own property favourably, considering them less risky and more reliable borrowers.

However, the stakes are higher with a second home, leading to generally larger deposit requirements compared to a first property mortgage.

This is due to the increased financial risk associated with managing multiple mortgages.

Dive deeper with us for expert insights into securing your second home through a well-planned deposit strategy.

How Much Deposit Do I need for a Second Home Mortgage?

The amount of deposit you’ll need for a second home will vary depending on the lender and your circumstances.

While some will only consider the amount you can put up as a deposit, others will consider the amount of equity you have in your current home or both.

Other factors that can influence the amount of deposit you need to include:

• Your creditworthiness.
• How you’ve handled your existing mortgage.
• The mortgage type.
• Lenders will consider your income and expenditure when calculating affordability.
• The type of property you’re eyeing and whether it’s standard or non-standard.

A 20% deposit is usually the standard for attractive mortgages with attractive rates and terms.

Most lenders will only offer deals with 80% loan to value (LTV) for second mortgages.

You may need a higher deposit depending on the type of property.

You’ll require a higher deposit if the lender considers the property a higher risk. If the property is a higher risk, they may set restrictions to 85%, 80%, 75%, or 70% LTV.

Need more information? Read our related quick help guides: 

• Portfolio mortgages.
• Converting residential mortgages to buy to let.
• Buy to let remortgages.
• Buy to let mortgages with bad credit.
• Buy to let guide.
• Can I buy a house and rent it to a family member? 

Can I Get a Second Mortgage with a 10% Deposit?

Theoretically, it’s possible to get a second home mortgage with a 90% LTV, requiring a 10% deposit. However, it’s tough.

Your choice of lenders will be limited, since most cap the loan to value they can accept at 80% or 75%.

Some lenders can stretch up to 85% under the right circumstances, while a minority can reach 90% and up.

Having significant equity in your first property and meeting all the lenders’ affordability and eligibility criteria requirements can increase your chances of getting a higher loan to value ratio.

However, higher LTVs for second mortgages will usually attract higher interest rates, translating to a higher repayment.

A higher deposit amount is more suitable, and the deal gets better every time you go higher by 5%, so aim for 15% to 20% deposit milestones or higher.

Using Equity as a Deposit for a Second Home

You can also remortgage your first property t0 get the funds needed for a deposit for your second home.

You can release the equity you hold in your first property and use the funds to finance the deposit necessary for a second home mortgage.

A second charge is another option to consider if you don’t want to remortgage your first home.

It’s usually a better solution if you’re looking to release the highest amount of equity possible.

You must meet the requirements and eligibility criteria of the lender and ensure you have enough equity in your home whether you choose to remortgage or take out a second charge.

It’s wise to consult a qualified advisor in any of these cases because it involves having more than one mortgage at the same time.

Check Today's Best Rates >

How Affordability Influences Deposit

Affordability is vital when you apply for a second mortgage, and it’s usually calculated by considering your monthly income and expenditure.

Lenders are generally willing to advance you up to four or five times your income.

The maximum amount a lender can offer can also be based on assessing your outgoings, including how much you’re paying on your current mortgage and other obligations like credit card debt and loan payments.

Such assessments provide a clear picture of how much disposable income you have.

For example, if you can get a £150,000 mortgage but the property you’re eyeing is going for £200,000, then you’ll need to come up with a £50,000 deposit. It would translate to an 80% LTV mortgage, which requires a 20% deposit.

A different lender may even advance a lower amount depending on the LTV ratio they accept, meaning you’ll need a higher deposit. It’s recommended that you shop around to get the best deal with the highest savings.

Affordability is easier when you’re looking to purchase a buy to let property that can generate rental income.

Your affordability improves with the potential rental income that you can use to repay the second mortgage.

How Will Bad Credit Affect Deposit?

Your credit score impacts your eligibility when applying for any type of credit.

Although it’s not a deal-breaker, a bad credit score will affect how much interest rate is available for you and the amount of deposit you’ll need for a second mortgage.

Some lenders may decline you if you have severe credit issues like bankruptcy or a CCJ, while others may be more welcoming.

It’s worth consulting mortgage advisors and brokers who have access to the whole market and can connect you with mortgage lenders who specialise in helping bad credit borrowers.

You’ll likely need to come up with a higher deposit than usual if you have a bad credit score.

You can still get a good deal depending on when the credit issue occurred, your current financial situation and the LTV on your current property.

To ensure you get the best possible deal and don’t get too many rejections, ensure you get professional advice before making your application.

Check Today's Best Rates >

How the Property Type Affects Deposit

You’ll fund different policies among lenders depending on the property type. Specific residential categories usually present more challenges than others when buying a second home.

Lenders may need you to provide a higher deposit based on the property you’re buying. The higher the risk the lender considers the property to be, the higher the deposit needed.

For example, you may face certain restrictions if you need a second mortgage for new build homes.

The lender may require a certain deposit amount or have particular builders or construction firms they prefer to work with.

You may also face additional challenges in your second mortgage application if the property involves non-standard construction, like:

• Above commercial properties.
• Ex local authority
• Homes with unusual construction, like concrete pre-fabs or thatched roofs
• Very high-rise flats or studio flats
• Use of hazardous materials like asbestos in construction

It may be hard to access the most affordable second mortgage deals with such properties, translating to a higher deposit or interest rate.

Can I Get a Second Mortgage with Zero Deposit?

Most lenders will be reluctant to provide a zero deposit or 100% LTV mortgage of any kind because of the levels of risk involved. However, it’s not impossible under the right circumstances.

You can get a second mortgage with no deposit by incorporating a guarantor in your application.

The guarantor can be a responsible person in your life, like a friend or family member with a good credit score and stable finances.

When you incorporate a guarantor, they also become responsible for repaying the loan.

They effectively agree to repay when you default or are unable to make repayments, effectively guaranteeing the mortgage and reducing the risk for the lender.

The guarantor may be required to put up their property as security or deposit a lump sum into an account held by the lender. The deposit can only be withdrawn after a certain amount of the mortgage has been paid off.

Deposit Required for a Second Home Final Thoughts

Putting a mortgage deposit can be challenging, especially if you’re already repaying another mortgage.

Therefore, it’s wise to ensure you get the best deal possible that can save you money, and you can do this by consulting with expert mortgage advisors and brokers.

Call us today on 01925 906 210 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

You’ve just started getting into the property market, and your goal is to purchase a property, spruce it up, and rent it out for a profit.

This is an age-old business model that thousands of investors have leaned on. But where does this leave you?

How do you know if you’re making a sound investment? How can you calculate your rental yield so that you can manage and monitor your investment and see if it is a viable investment, to begin with?

This is where a rental yield calculator comes in and provides a rather insightful outcome.

This type of calculator helps investors measure the possible earnings they can make on a property.

You will find several rental yield calculators online. If you choose to use them, keep in mind that they often don’t consider the cost of ongoing property maintenance and other expenses – which are additional costs you will need to consider.

This article provides an overview of rental yield, how to calculate rental yields for properties located in the United Kingdom, and covers a few of the most common FAQs surrounding rental yield. Let’s jump right in.

What is a Rental Yield?

The first step to understanding a rental yield calculator is understanding what a rental yield is in the first place.

So, what is a rental yield? In general terms, a rental yield is the amount of money you can earn from an investment property, expressed as a percentage of the asset value.

As a property investor or a potential landlord, it is helpful to know your return on your outlay of capital.

When you have a rental yield calculated, you have a better idea of how much money you have to “play” with each month and whether or not your investment is performing over the long term.

What is a Good Rental Yield in the UK?

While shopping around for the right rental property, you may wonder what is considered a good rental yield in the UK.

Generally speaking, keep in mind that it can fluctuate from property type to property type; a rental yield of 7% or more on a buy-to-let is considered a “good” rental yield in the United Kingdom. So, if your yield is 7%, you’re onto a good thing.

How to Calculate Rental Yield on UK Properties

Take the monthly rental income and multiply it by twelve to calculate your rental yield. This will give you the annual income of the property.

Then, take the property’s annual rental income and divide it by the price you paid for the property. Then, multiply that figure by 100.

Here’s a helpful example below.

If you bought a property that costs £150,000 and have an expected asking monthly rental of £500, multiply the rental amount by 12 to get to the annual rental amount which is £6,000.

Then, divide the annual rental amount by the property purchase price: £6,000 / £150,000 = 0,04.

Now, multiply this figure by 100 to get to your rental yield percental of 4%. In this instance, your rental yield would not be considered “very good” because it is below 7%. However, “good” yield is anything above 5%.

What Areas in the UK Offer the Best Rental Yields?

According to SDL Auctions in the UK, there are certain areas (or cities) where it is better to invest in buy-to-let properties because they generally offer a greater return on investment.

Below is a brief look at the possible/expected rental yields in several of the more popular UK property investment areas.

These are average property costs and yield percentages based on information drawn from the likes of Home.co.uk and Zoopla in 2021 and without taking into account mortgage costs.

City/Area Property Value Possible Rental Amount Annual Rental Yield Percentage

• Manchester £202,734 £1,232 £14,784 7.29%
• Birmingham £205,703 £1,145 £13,740 6.68%
• Portsmouth £242,330 £1,427 £17,124 7.07%
• Bradford £133,580 £555 £6,660 4.99%
• Nottingham £226,877 £1,376 £16,512 7.28%

FAQs Regarding Rental Yield in the UK

Below are a few questions that often crop up with investors regarding rental yield in the UK.

How Much Profit Should You Make on a Rental Property in the UK?

While most investors are looking for between 5% and 8% yield on a rental property, it is still a good investment if you’re making 4% or more, as this is where your investment can grow from.

In addition, the property is considered a decent investment if there’s any profit left after you have paid your outgoings.

What is the Average Rental Yield in the UK?

While most investors are aiming for property yields of between 5% and 8% in the UK, not everyone can afford properties that can produce such yields.

If you take a clear overview of all the areas and their associated yields, you will notice that the average rental yield in the country sits at approximately 3.63%.

Is There a Way to Increase My Property Rental Yield in the UK?

Many landlords and investors want to find ways to change their low or good rental yield to something higher and more profitable.

This is entirely possible if you’re willing to put in the effort to make your rental property more sought after than the bog standard rental.

If your property is more sought-after, you can charge more rental and therefore make a larger profit. Below are just a few ways that you can increase your property rental yield.

• Review your property-related expenses and find ways to cut those costs. For instance, building insurance, accessories (lights, fittings etc.), services providers – all of these costs can probably be whittled down.
• Provide free internet access to tenants.
• Convert your property to a green property – eco-living is on the rise.
• Maximize storage space (cupboards, shelving, etc.).
• Consider allowing pets (of course, only if your property is geared towards it).
• Keep the property well maintained and feature modern fittings (this attracts tenants).
• Buy property in an area close to public transport and other services and shops.

Is Renting Out UK Property Profitable?

Renting out property in the UK can be profitable due to recurring income, property value appreciation, and tax benefits.

That said, you could be faced with expenses along the way that dip into your profits or even deplete them. Think about a broken air conditioning or heating system or a fire breaking out.

How Can I Calculate My Actual Profits Inclusive of Costs in Monetary Value on a Rental Property?

Preparing a cash flow statement is an excellent way to see how the figures work out in the end. Below is an example of a very basic cash flow statement to help you understand how it works. (These figures are simply examples and may be unrealistic in terms of UK property prices).

Property purchase price: £100,000

Deposit paid on the property: £25,000

• Expected gross income on rental: £900

• Possible vacancy loss at around 5%: £45

The effective gross income in this scenario is £855

• Possible repairs around 5%: £45
• Property management costs of around 8%: £72
• Property tax, insurance and other costs: £180
• Principle and interest (mortgage expense): £320

In this scenario, the projected monthly profit before tax is £238.

Rental Yield Calculator Final Thoughts

Using a rental yield calculator online can help you determine the expected return on investment in terms of monthly profits.

But, of course, it’s best to factor in all additional expenses you may face, understanding better what to expect in terms of profits.

It makes perfect sense to own property with another person in some instances.

Perhaps you’re married and want to invest in property together, or perhaps you simply want to invest in property with a group of people for profit.

Either way, when people consider buying property together, they worry about what kind of joint ownership they should have.

There’s also a question of whether a tenancy in common would be a viable route to take.

This article provides an overview of tenants in common, what it is, how it works, and covers some FAQs.

What does  “Tenants in Common” mean?

Tenants in common refer to being part of a tenancy in a common contract – this means two or more people are owners of the property.

This is basically when two or more people have an interest in the same property and can leave their share to a beneficiary at the time of their death.

This doesn’t mean that you own a separate part of the property but merely have a different proportion in terms of monetary value.

For instance, you may own 60% of the property, whereas a friend of yours owns 40%.

If You Want to Buy Property with Family or Friends, Do You Need a Tenancy in Common Mortgage?

Here is the good news, if you choose to buy a property with a family member or friend, there’s no need to have a special tenancy in common mortgage.

Instead, you simply need a regular mortgage and must make use of a solicitor to draw up legally binding ownership arrangements.

Joint Tenants vs. Tenants in Common – What’s the Difference?

Whether you decide to be joint tenants or tenants in common will come down to several things, such as the individual you wish to co-own real estate with and, of course, your specific situation.

However, if you want to avoid facing issues in the future, it’s important to carefully consider which of the two options is ideal for you.

To ensure that you’re able to make an educated decision, consider the main differences between joint tenants and tenants in common. These are explained below for convenience:

• Tenancy in Common

When there’s a tenancy in common agreement in place, when one of the owners become deceased, the portion of their property is passed over to a named beneficiary in their last will and testament.

Another thing to note is that tenants in common own a percentage of a property. This is helpful in instances where one owner will contribute more money than the other in the deposit or even the total cost of the property.

With a tenancy in common, a new co-owner can be added to the tenancy in common at a later stage. A new co-owner can be added even years after the original tenancy in common is set up.

• Joint Tenancy

In the case of a joint tenancy, when one of the property owners passes away, the ownership portion is automatically given to the surviving partner, even if the co-owner has stipulated otherwise in their will. This is called Rights of Survivorship which is specific to joint tenancies.

Another thing to note is that joint tenants each own the whole value of the property. That means they both own 100% of the property.

As all the joint tenancy owners are listed on the same title deed, and they are seen as one legal entity, it makes sense that the property simply remains the possession of the surviving partner when one party passes away.

Of course, this means that all parties must enter the agreement at the same time.

Rules that Apply to Both Tenants in Common & Joint Tenancy

When trying to decide between a tenancy in common and joint tenancy, you may wonder what rules you may have to adhere to. Below are two rules that apply to both types of property ownership contracts:

•  The property cannot be sold unless both co-owners agree to it.
• Co-owners must sign a joint mortgage instead of taking out separate mortgages.

Percentage Ownership Options Pertaining to Tenants in Common

When it comes to, joint tenancy each co-owner owns 100% of the property. It’s a little different from a tenancy in common in that you each own a different proportion of the property.

Together, this adds up to 100%. How you work out the percentages will be up to you and your co-owners. The percentages of ownership should always be stipulated in the agreement because if it is not, it is legally assumed that each owner has an equal amount of ownership shares.

Can I Transition From Sole Owner to Tenants in Common or Joint Tenants?

Property owners who want to include a new owner on their property can change their sole ownership to tenants in common ownership fairly easily. It is also fairly simple to transition from joint tenants to tenants in common.

To change to a tenancy in common from a joint tenancy, the owners must go through a “severance of tenancy” process and then apply for what is called a “Form A Restriction. This is sent to the HM Land Registry’s Citizen Centre for review.

Here’s the interesting part! If you wish to change to a tenancy in common from a joint tenancy, you don’t need to obtain permission from all owners.

If you can’t agree, you are entitled to serve the other others notice of severance. You will need to acquire the relevant forms and ensure the required supporting documents. It’s best to work with a solicitor or legal executive, which will cost you.

The process itself, however, is free. Using a solicitor ensures that everything is handled legally and above board – safeguarding both you and the other parties.

While some people may see no immediate reason why they would ever need to make changes to their ownership format, it’s best to err on the side of caution.

There are instances where changing the ownership format and contract makes sense. For instance, if you plan to separate or divorce from your partner or if you wish to leave a portion of your property to another person.

Expected Disadvantages of Having a Tenancy in Common

One thing to be aware of is that the tenants in common contract is not well suited to every person.

It’s best to consider all of your options and the possible disadvantages before determining if this is the right course of action for you.

There are disadvantages to be aware of before you get yourself into such a contract. These include:

• If one of the property co-owners passes away and doesn’t have a will in place stipulating their beneficiary, the property will go through probate, which is costly and a lengthy process.
• If you co-own the property and one of the co-owners wishes to sell the property and you don’t, you may be served with a partition action. This could mean that you’re forced to sell the property.

It’s best to be aware of these disadvantages before getting into a tenancy in common to avoid these particular risks.

Tenants in Common Final Thoughts

Tenants in common can be a great ownership option for two or more people who wish to co-own property together.

That said, before you jump into the agreement, make sure that all parties are aware of how it works, what to expect, and the associated risks along the way. This will ensure that there are no nasty surprises or any confusion along the way.