December 24, 2012 @ 3:00 pm - posted by Liz

How do I pay the mortgage when I'm on a Career Break or Sabbatical?Mortgage

If, like me, you are a homeowner, one of your main concerns about taking a career break or sabbatical is how to pay the mortgage.  On my 16 month Career Break, I rented my property; which in turn, covered my mortgage payments.  Below are some things to consider for your Sabbatical, but you must always discuss these options with an expert who can fill you in with more details.

 

1.    Can you take a payment holiday from your mortgage payments?

After spending all your hard earned money getting your home the way you like it, you may hate the idea of someone else living there who will not care for it or look after it as much as you.

If your career break or sabbatical is for a few months only, you may be able to take a Mortgage Payment Holiday.  This way you don’t have to make mortgage payments for a while, however, due to the interest on your mortgage, this will mean that you will end up paying more during the life of your mortgage.  Speak to your mortgage company, if this is something you are considering and find out how a repayment holiday it will affect your interest and final payment by.

Remember that if your home is furnished, you will probably still have to pay Council Tax, even if the home is vacant.

 

2.    Insurance

You will need to speak to your insurance company about insuring your property while you are away.

If your home is left vacant while you are away, your home may not be insured.  My mother is going to India for 3 months soon and her insurance company will only insure her vacant home for a max of 3 months.

 

3.    Will your mortgage company let you rent out your property?

Again, you will need to speak to your mortgage company to find out if they will let you rent out your property.  My mortgage company was more than happy to let me rent, on the condition that I didn’t rent out to a business e.g. as an office.

You will need to find out if they are happy for you to stay on your same contract and rate.  My mortgage company were happy for me to stay on my current mortgage rate and didn’t make me change to a ‘buy to let’ mortgage, which would have cost me more due to higher interest rates, but you will need to discuss this with them.

If your mortgage contract expires while you are on your career break or sabbatical, then you will need to speak to your mortgage company or advisor about your options, for example can you start another contract early, are you better being automatically moved to a variable rate?

 

4.    How much will you get for renting out your property?

Have a look online, sites such as ‘Rightmove.co.uk’ will give you a good idea of how much your property is worth on the rental market.  When I did this I found that the rental value I could expect would cover my mortgage payments, but keep in mind, your letting agent will take a percentage of this.

 

5.    Get a good letting agent

If you are going to rent your property, you need to get a good letting agent.

Also make sure that the letting agent are a licenced ARLA (The Association of Residential Letting Agents) agent.  http://www.arla.co.uk

Speak to the people who live near you to find out who they rent through and if they think they are any good, would they use them if they had property to rent?

Shortlist a minimum of three local letting agents and get them round.  Things to consider in your meeting are:

a.  The value your property.

b. What can be done to increase your rent or make it more attractive to potential tenants.

c. What is the rental market like at the moment.

d. What legal requirements you will need to do e.g. PAT testing, gas checks, environmental checks.  If you don’t know people who can do these, your letting agent should be able to suggest people.

e. Get a copy of their terms and conditions of renting and discuss anything you don’t understand.

f. Ask how many clients they have on their books who live or work abroad and how do they manage these clients.  The letting agent should know that you may not have to pay tax on the earnings from your home while you are abroad and what forms need to be completed.

g. They submit all tenants deposits to the Tenancy Deposit Scheme, which is a legal requirement.

h. They carry out credit checks on all potential tenants.

i. They write to the local authority and utility companies etc. informing them that you are no longer the occupier and the details of the new occupiers.

j. Are they a licenced ARLA (The Association of Residential Letting Agents) agent.  http://www.arla.co.uk

 

6.    Things to think about after you have seen the letting agents.

a. Carefully read the terms and conditions of the letting agents proposed contract and any other documentation about terms of business they send you.  Remember you can always ask for alterations.

b. Never sign anything you do not understand.  If you don’t understand it, ask questions and seek advice.

c. Confirm important issues in writing and always keep a copy

d. Agree a fair commission with the letting agent. I found that for a full letting service where they deal with everything, they tend to quote about 15% in their terms and conditions, but remember you can always negotiate this price down.  I would say 10-12% is a fair price

e. In case your house or flat needs work while it is being let, agree a price where the letting agent does not have to contact you for permission to carry out work.  I agreed price of £125, where if work needed doing, they would just go ahead without my permission.  During my time away I had a leak in the bathroom that needed fixing and a faulty valve on the boiler that meant it stopped working.

 

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About Liz

At the age of 39, Liz quit the 'Corporate World', downsized her life and followed her heart. Upon her return she set up CareerBreak360 with Robert to help others achieve their Career Break dreams.

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