You have made an important decision: you are going to leave your house and rent it out soon. Your house will become an investment property. What does this mean for your mortgage?
The decision to rent out your home will have the advantage of earning rental income. You will thus receive a nice rent, which is of course always welcome. But what consequences will this have on your mortgage credit? Will you be able to stop paying off your loan because you no longer live in your home? And what about taxes on rental income?
Will your rental income be taxed?
Let’s start with this question. One thing is certain, you will pay tax on your rental income.
1. You rent to private persons
If you rent your investment property to individuals, it is not the actual rental income that will be taken into account, but only the indexed cadastral income x 1.40. This will then be added to your other income and therefore taxed at the marginal tax rate (application rate on your highest tax bracket).
2. You rent to a company or a self-employed person
If you rent your home (investment property) to a company or to a person using it (in whole or in part) for professional purposes, then it is indeed the actual rental income that will be taxed. If you rent out your property to someone who also uses it for their work, you may want to clearly split the rent. In this way, the real rental income will only serve as a tax base for the professional part, which will make a big difference.
Another good news: there is, for rental income, a standard deduction of costs set at 40%, with a maximum of two thirds of the revalued cadastral income. You will therefore pay less tax in this way than initially planned.
Rental income> <monthly home loan charge
Unfortunately, things will not be that simple. Whether or not you occupy the house you have mortgage loaned for won’t make much difference. You will have to continue to repay each month and ultimately become the owner of your home. The important thing will be to carefully study the relationship between your rental income and your monthly payments:
1. Rental income is the same or higher
If the rental income is the same or higher than your monthly charges, there will of course be no problem. In a way, it will be your tenant who will continue to repay your loan.
2. Rental income is lower
If the rent is lower than your monthly payment, you will have to make up the difference with your own means. If you are unable to do so, because the difference is too large, for example, it will then be possible, for example, to request a refinancing of your mortgage. This will also allow you to extend the duration to lower your monthly payment and adapt it to your rental income. However, also note that by extending the duration of your home loan, you will also have to repay more interest over the entire duration. It’s up to you to see if the game is worth the candle.
We also advise you to talk about it with a credit intermediary. He will listen to you, analyze your personal financial situation and find the refinancing that suits you best. A credit intermediary works with different loan organizations and knows their offer and their conditions perfectly well. Do not hesitate to ask him any additional questions.
Renting out a house: some useful tips
Here is a whole series of interesting little tips again if you decide to rent out your home. Read them carefully. You will undoubtedly find tips that you had not thought of.
1. EPB certificate
You must have a resource sharing certificate. This must be established by an approved energy expert. As of this year 2020, the law also requires the presence of smoke detectors on each floor! If you are renting student accommodation, a smoke detector should be installed in each room.
2. Which rent are you asking?
You are free to set the amount of the rent as you see fit. Remember of course to take into account the rents generally applied in your municipality. And be aware that once you have fixed the rent in a contract, it can only be indexed (each year), but no longer modified.
3.Refuse a tenant
You cannot refuse a tenant for his ideas or under provisions contrary to the anti-discrimination law.
4. Drafting of a lease contract
Have your lease contract drawn up by a specialist. The legal obligations to be respected will indeed be very numerous. Also, remember to add a detailed inventory! At the end of the lease, the tenant must return the property in the same condition as at the beginning. The inventory will allow you to obtain reimbursement for any damage from the tenant. You must also register the lease contract.
5. Investment property and rental guarantee
You can ask for a rental guarantee. This will correspond to a maximum of 2 months’ rent in Brussels and Wallonia and 3 months in Flanders.
6. Fire insurance – investment house
Take out fire insurance for the building yourself (as the owner). Your tenant will have every interest in insuring his furniture and his liability as a tenant, but nothing legally obliges him to do so. So remember to include this obligation in the lease contract.
7. Refinancing your mortgage loan
When rental income does not cover mortgage repayment, you may want to consider refinancing your mortgage. In this way, the repayment of the credit remains feasible and you benefit from financial comfort. Ask one of our specialists