You have taken an important decision: you are going to leave your house and rent it out. Your house will become an investment property. What does this mean for your mortgage?
The decision to rent out your house will have the advantage of bringing in rental income. You will receive a nice rent, which is of course always welcome. But how will this affect your mortgage? Will you be able to stop paying your mortgage because you are no longer occupying your home? And what about the taxes on the 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 out your investment property to private individuals, the actual rental income will not be taken into account, but only the indexed cadastral income x 1.40. This will then be added to your other income and taxed at the marginal tax rate (the rate applied to your highest tax bracket).
2. You rent to a company or a self-employed person as a natural person
If you rent your home (investment property) to a company or person who uses it (in whole or in part) for professional purposes, then the actual rental income will be taxed. If you rent your property to a person who also uses it for his or her work, it is in your interest to clearly split the rent. In this way, the actual rental income will only serve as the taxable basis for the business part, which will make a big difference.
Another piece of good news is that there is a flat-rate deduction of 40% for rental income, with a maximum of two-thirds of the revalued cadastral income. This means that you will pay less tax than originally planned.
Rental income >< monthly housing loan charge
Unfortunately, things are not that simple. Whether or not you occupy the house for which you have taken out a mortgage will not make much difference. You will still have to make monthly repayments and will eventually own your home. The important thing is to consider 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 expenses, there will of course be no problem. In this case, it will be your tenant who will continue to repay your loan.
2. The rental income is lower
If the rent is lower than your monthly payment, you will have to make up the difference from your own resources. If you are unable to do this, for example because the difference is too great, then you can apply to refinance your mortgage. This will also allow you to extend the term and thus lower your monthly payment and adapt it to your rental income. However, you should also be aware that by extending the term of your home loan, you will also have to pay more interest over the entire term. It’s up to you to decide whether it’s worth it.
We also advise you to talk to a credit intermediary. He or she will listen to you, analyse your personal financial situation and look for the refinancing that suits you best. A credit intermediary works with various lending institutions and is familiar with their offers and conditions. Don’t hesitate to ask him/her any additional questions.
Renting out a house: some useful tips
Here are a few more interesting tips if you decide to rent out your house. Read them carefully. You will undoubtedly find some tips that you had not thought of.
1. ILL certificate
You must have an EPB certificate. This must be drawn up by a certified energy expert. Since 2020, the law also requires smoke detectors on every floor! If you rent out student accommodation, a smoke detector must be installed in every room.
2. What rent do you charge?
You are free to set the rent as you wish. Of course, you should take into account the general rents in your municipality. And remember that once you have fixed the rent in a contract, it can only be indexed (every year), but not changed.
3. refusing a tenant
You cannot refuse a tenant because of his or her ideas or because of provisions that are contrary to anti-discrimination law.
4. Drawing up a lease agreement
Have your lease agreement drawn up by a specialist. There are many legal obligations to be met. Remember to include a detailed inventory of fixtures! At the end of the lease, the tenant must return the property in the same condition as it was at the beginning. The inventory of fixtures will enable you to obtain reimbursement for any damage caused by the tenant. You must also register the lease agreement.
5. Rental property and the rental guarantee
You can request a rental guarantee. This will be a maximum of 2 months’ rent in Brussels and Wallonia and 3 months’ rent in Flanders.
6. Fire insurance – investment property
Take out fire insurance for the building yourself (as the owner). It is in your tenant’s interest to insure his furniture and liability as a tenant, but there is no legal obligation to do so. So remember to include this obligation in the lease agreement.
7. Refinancing your mortgage
If the rental income does not cover the mortgage repayment, you can consider refinancing your mortgage. In this way, the repayment of the loan remains feasible and you benefit from financial comfort. Ask one of our specialists for more information. We will be happy to help you.