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In our latest blog we look at how property investment, let to buy and buy to live can help you if your household income is under threat.

Let’s face it, this year isn’t going to go down in history as the most fun anyone’s had. We’re still in the midst of Covid-19, with apparently no end in sight. And even though our economy is still functioning there are elements of it that are suffering terribly. Hospitality and retail have borne the brunt of lockdown and continues to do so. 

In this article, the Guardian looks at new ONS figures and how the employment market has been affected.

UK unemployment to soar by Christmas, economists fear – business live | Business | The Guardian

On Wednesday, Parliament square was filled with 400 musicians, playing parts of Holst’s ‘Mars’, a thunderous and foreboding composition. The performance was part of a musical protest to raise awarenes…

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Figures analysed by Statista also show a marked increase in unemployment, but more positively forecast that this will reduce during 2021. Take a look at their data here.

Furlough comes to an end on 31st October, and it remains unclear what support there will be for people still furloughed. So it seems likely that unemployment will rise quickly as businesses make redundancies in November. And that means many people will be unable to afford mortgages and other financial commitments.

If I lose my job what does property investment have to do with it?

Actually, if you are a homeowner with a mortgage there are steps that you can take to protect your home, and the solutions might surprise you! 

Firstly, your mortgage payment is probably lower than the rental value of your home. In short, if your income is under threat you could rent your home out and either buy or rent a home for you and your family. 

More about how property investment can help later on.

 

 

What you need to know about renting out your home

1. There are two ways to finance your home rental

The conventional route is, of course, taking out a buy to let mortgage. That allows you to rent your property out to a third party. 

You could retain your existing mortgage and apply to your lender for Consent to Let. If you let a property using a residential mortgage, you will be committing mortgage fraud, and you could invalidate your mortgage.

2. You will have a tax liability on your new rental income

Profit after your expenses is taxable, and you will have to submit a tax return. Depending on how you set yourself up, mitigating much of your tax liability is possible, but remember to estimate this in your calculations.

3. As a landlord you will have responsibilities to your tenants

Quite rightly, you have responsibilities to the people who rent your home, and they to you. This can be a complex area, so consider the services of a property management professional.

4. Buy to Let Mortgages are usually interest only

So that means that the monthly payment for your mortgage will be much lower than a repayment mortgage. This could work for you if you are buying a second home, you have equity and you need to raise a deposit

5. Buy to let Mortgages usually require a 25% deposit

You will need equity in your home to convert to a buy to let mortgage. If you are raising capital for a deposit for a second home you will need to bear this in mind. 

 

I think I’ll be out of work long term. How can property investment help?

You have several options to consider for you and your family:

  1. Buy a new home nearby using the capital you have raised in your family home for a deposit.
  2. Buy a new home somewhere else where property prices are much lower.
  3. Take on a rental property. If you have a family, a property suitable for your needs
  4. Take on a rental property. If you are single, or a couple, you could consider house sharing, or renting a room in an HMO (house of multiple occupancy) That will reduce your costs further
  5. make sure that you have a break in your buy to let and make it clear to your lender that you will want to return home at some point

I don’t think I’ll be unemployed long. What can property investment do for me?

If you aren’t planning to be out of work for long, being able to return to your home may be your main consideration. So you have slightly different options:

  1. Apply for Consent to Let and rent your home out. 
  2. For a short period of time, you may be better served by renting a suitable property for you and your family. Taking on a house, flat or HMO could suit, depending on your needs and what you can cope with.
  3. But buying another property also remains an option locally or somewhere that property prices are lower.

So even though you may be expecting to lose your job, there are options to safeguard your home. Of course, you must accept that you won’t be living in it for a while, but you will provide financial stability for you and your family. And the additional rental income may provide a cushion while you get back on your feet.

Unexpected consequences…

If you buy a second home, when you’re ready to return to your original home, you have an oven-ready buy to let property in place to continue generating an additional income for you.

Our advice

If you are concerned about losing your job, are a homeowner, and interested in looking at the ideas in our blog in more detail then please get in touch. Our advice is always to take advice from professionals before taking any steps that could put your home at risk.