Research suggests that over one in ten Brits own a second home or overseas property. Collectively, they’re worth around £941bn – a number that’s grown by 53% since 2001.
This is wonderful for the property market, but there’s no escaping the fact that a fair number of those multiple homeowners have inadvertently become landlords.
Sometimes referred to as ‘accidental landlords’, these people acquire property for a number of reasons that aren’t always planned. It may have happened to you (or you might be on the brink of becoming an accidental landlord).
If that’s the case – what should you do?
We have the answers.
How do people become accidental landlords?
The most common reason people become accidental landlords is because holding onto a property is simply the best option. They could be inherited from a parent or partner or retained after moving to a new house and failing to sell the property.
Some second homes are holiday boltholes, remote offices while working away, or flats for midweek stays. It’s not uncommon for parents to buy homes for their children while at university, either, thus effectively becoming the closest of landlords.
Divorced couples can also become accidental landlords when, for instance, the wife keeps the family home, but the husband’s name is still on the mortgage. The husband would then typically buy another – and therefore second – home.
In most of these scenarios, the property in question is likely to be let to someone at some stage. But that’s where the problems can arise.
You may have heard of Buy To Let, but what about Let to Buy?
If you don’t have a buyer for your existing home but need or want to move, let to buy mortgages are a great way to become a not-so-accidental landlord – even if you were never planning to rent out your home originally.
Providing you have enough equity in your home, a let to buy mortgage enables you to remortgage and release cash that can be used to put towards the deposit on your new home. It’s a popular option with couples who want to move in together but retain their own properties, or perhaps you have found your dream home but been unable to sell yours.
You basically end up with two mortgages in this instance – a standard residential mortgage for you new place and a let to buy deal for your old home.
The kicker: additional stamp duty
Some people aren’t aware that, if you buy an additional home, you’ll have to pay extra stamp duty on top of the current rate.
This can be an unexpected sting in the tail for landlords (both accidental and planned), therefore we recommend having a read of HMRC’s stamp duty guide and using their calculator before making any big decisions.
While we can’t provide tax advice at Gough Mortgages, we do know an awful lot about Buy to Let and Let to Buy mortgages. So, if you have any questions about becoming an accidental landlord, just get in touch with our knowledgeable and friendly team.