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Mary Said:

Refinancing a loan - questions and pros/cons?

We Answered:

When we refinanced our old house, it appraised for 2.5 times our original purchase price (a fixer-upper we had fixed up) and yes, we had to have a new appraisal, but no it did not raise our property taxes. If your insurance coverage is insufficient to cover full replacement of the house now that you have made all your improvements you may want to increase your coverage which would raise your premiums, but it would be worth it.

The closing costs you've been offered sound reasonable to me. Your break even point on closing costs will be 25 months, so if you are going to be in your house longer than that then it is worth it. 5.6% may not be the lowest rate available, but much depends on your financial situation so be sure to shop around to make sure you are getting the best deal.

Sheila Said:

wanting to rent my property...?

We Answered:

Check that the terms of your deed allow for private rentals. Your mortgage lender may give permission for you to let the property for a fixed term, say 2 years, under your current mortgage terms. After that time you would need to transfer to a business mortgage. Each year you will receive a tax return on which you declare the cost of the mortgage, the amount received in rent and any running costs incurred (maintenance, repairs, insurance, fees etc). The revenue will then send you a tax demand. You need to change your Insurance policy to a dwellings let policy, the cost isn't normally huge. Go to the Citizens Advice Bureau to discuss the difference between furnished and unfurnished properties, as the rights of you and the tenant vary depending on the type of let. If you use an agent you will have fees involved, but you have the advantage of them understanding letting rules and regulations. You will need to provide annual safety cetificates for gas etc. If your tenant got into arrears would you still be able to pay the mortgage? Keep every single piece of paperwork and every receipt. Never make verbal agreements with tenants - everything must be in writing. It can work if you pick your tenants carefully. Check references as I found that many of them were written by family or friends of the proposed tenant. A genuine person will be happy to give proof of id, last known address, job details etc. Always take vehicle details too as this helps trace them if there was ever a problem involving the authorities. You MUST have a tenancy agreement - you can actually buy these online but I would use an agent. If the tenant is paying the rent into your bank, open a new account and give them those bank details. Sorry - it was a long one!!!