Travel Globally, Mortgage Locally: Tips For The Adventurous Homeowner

Travelling the world is a dream for many, but it can seem like an impossible goal if you're paying off a mortgage. However, with some careful planning and budgeting, it is possible to see the world without having to sell your home. Here are some tips to help you achieve your travel dreams while keeping up with your mortgage payments:

- Home exchange programs: Consider a home exchange, where you stay in someone else's home while they stay in yours. Websites like Intervac and HomeLink facilitate these arrangements, providing insurance and peace of mind for both parties.

- Rent out your space: If you have extra space, such as a loft or garage, consider renting it out for storage. You can also rent out your entire home while you're away through platforms like Airbnb or VRBO. This can provide additional income to cover your mortgage payments and other travel expenses.

- House-sitting: Sign up for house-sitting opportunities through websites like TrustedHousesitters. This can provide free accommodation or reimbursements during your travels.

- Long-term planning and budgeting: Start planning and saving for your trip well in advance. Create a budget that includes your mortgage and living expenses, and set aside funds specifically for travel.

- Utilize your mortgage loan: Consider using a mortgage with a redraw facility as a travel fund. This keeps your savings separate and can reduce your interest payments.

- Choose the right lender: Look for lenders who cater to travellers, such as those offering Air Miles or other travel rewards on mortgage interest payments.

- Payment vacations: Discuss the possibility of a payment vacation with your lender, which would allow you to defer payments for a short period during your travels. However, this option should be approached with caution, as it may carry risks.

Renting out your home

Finding Tenants

If you're lucky, you might be able to find a tenant through your personal network. Consider asking your friends and family if they or anyone they know is looking for a place to rent. This way, you might find a tenant more easily and also have peace of mind knowing your property is in good hands.

If you don't know anyone looking to rent, you can try listing your property on rental platforms like Airbnb, Craigslist, or local newspapers. When creating your listing, be sure to include clear and attractive photos of your property, a detailed description, and your requirements for tenants.

Preparing Your Property

Before renting out your home, ensure that it is in a fit state to be let. This might include installing smoke alarms and extractor fans, ensuring any upholstered furniture is fireproof, and having gas appliances tested by a Gas Safe engineer. You will also need to provide your tenants with an energy performance certificate.

Additionally, consider whether you want to rent out your property furnished or unfurnished. Furnished properties might be more appealing to potential tenants, but they also come with the risk of damage to your personal belongings.

Understanding the Costs and Income

When renting out your home, there are several costs to consider. These may include administration fees for "consent to let" from your lender, landlord insurance, and the cost of storing any items you don't want to leave in the property. There may also be costs associated with using a letting agent or property manager to handle the tenancy while you're away.

On the income side, calculate how much rent you can charge. This will depend on factors such as the location and condition of your property, as well as the local rental market. Ensure that the rent you charge covers all your costs and ideally contributes towards your mortgage payments.

Legal and Insurance Considerations

Before renting out your property, check your homeowner's insurance policy to ensure it covers short-term rentals. You may also need to inform your lender and switch to a buy-to-let mortgage or obtain "consent to let". Be mindful of local laws regarding short-term rentals, as some places may forbid them or consider them taxable income.

Managing the Tenancy

If you're travelling, you might want to consider hiring a property manager or letting agent to handle any issues that may arise during the tenancy. They can also help with finding and vetting tenants, collecting rent, and conducting property inspections. However, their services will come at a cost, typically a percentage of the rental income.

Dealing with Potential Issues

Renting out your property comes with certain risks, including the possibility of damage to your property or issues with tenants not paying rent or refusing to vacate the premises. To mitigate these risks, thoroughly vet potential tenants, use a detailed tenancy agreement, and consider requiring a security deposit.

Short-Term Rentals

If you're not ready to commit to a long-term tenant, you could consider short-term rentals through platforms like Airbnb, especially if you're travelling to a popular destination. This option can be more lucrative, but it also requires more work in terms of cleaning, guest communication, and managing bookings.

Alternative Options

If renting out your entire home doesn't feel right for you, consider other options such as home exchange programmes or taking in a lodger. Home exchange allows you to stay in someone else's home while they stay in yours, and it can be a more affordable and community-oriented way to travel. Alternatively, taking in a lodger can provide additional income to contribute towards your mortgage, as well as someone to watch over your house and split the bills.

Home exchange

To get started, create a listing on one of these websites. You will need to introduce yourself, add pictures of your home, and include information such as availability. You can then look for homes in your desired destinations and send exchange requests. Communicate with potential hosts via the website's messaging system to organize the details of your exchange.

There are different types of home exchange options available. The classic exchange involves two families exchanging homes, either simultaneously or on different dates, in a reciprocal arrangement. Another option is to use a GuestPoints system, where you can offer points to another member in exchange for staying at their home, and then use those points to stay at another member's home.

Renting out storage space

You can rent out a variety of spaces, including garages, sheds, barns, warehouses, and even just land or parking lots. Consider what type of space you have available and whether it would be suitable for storage. For example, if you have an empty garage, you could rent it out for vehicle storage or as a workshop.

Where to Advertise

There are several websites dedicated to connecting storage space owners with potential renters, such as Neighbor, StoreAtMyHouse, STOW IT, and Stache. These sites typically charge a small fee, but they provide visibility and payment processing services. You can also try advertising on your own through Facebook Marketplace or Craigslist, although you'll need to be more cautious when interviewing potential renters.

Setting Rules and Contracts

It's important to set clear rules and enforce them consistently. Decide how your renters will access the space, how often and when they can access it, and what type of items they are allowed to store. Be sure to create a detailed lease contract that outlines all the terms and conditions of the rental agreement.

Local Laws and Insurance

Before renting out your space, be sure to check local laws and regulations regarding storage rentals. You should also consider purchasing additional insurance to protect yourself and your property. Some peer-to-peer storage platforms, like Neighbor, offer liability insurance for hosts.

Pros and Cons of P2P Storage

House-sitting

• Sign up for house-sitting platforms: There are several websites and platforms that connect homeowners with house-sitters, such as TrustedHousesitters. These sites allow you to set up alerts for new assignments, so you can pick and choose your destinations. You can also find long-term or short-term opportunities to fit your travel plans.
• Be flexible and adaptable: House-sitting assignments may vary in length and location, so it's important to be flexible and adaptable. You might not always find opportunities in your desired destinations, but being open to new places can lead to exciting and unexpected adventures.
• Be proactive and prepared: House-sitting opportunities can be competitive, so it's important to be proactive in your search. Create a compelling profile on house-sitting platforms, highlighting your skills and experiences. Additionally, be prepared to provide references or complete any necessary applications promptly.
• Communicate clearly: Effective communication is key when house-sitting. Be clear about your expectations, responsibilities, and any specific instructions with the homeowners. This will help ensure that everyone is on the same page and avoid potential misunderstandings.
• Respect the home and its rules: When house-sitting, it's important to respect the homeowner's property and follow any rules or guidelines they have in place. Treat the home as you would your own, and be considerate of their belongings and space. Leave the home in the same condition, or better, than you found it.
• Take advantage of the perks: House-sitting often comes with perks, such as access to a kitchen, laundry facilities, or even a vehicle. Take advantage of these amenities to save money and enhance your travel experience. Additionally, if you're pet-sitting, enjoy the company of your furry friends and give them the love and care they deserve!

Payment vacations

A mortgage vacation allows you to suspend your mortgage payments for a short period, typically up to four months. This option is available to those who have made prepayments on their mortgage, which can be done by making lump-sum payments or increasing regular payments. For example, TD allows a mortgage vacation of up to four months, depending on the amount of the prepayment. If you have a $325,000 mortgage with a five-year fixed mortgage rate of 2.39% and a 25-year amortization, your monthly mortgage payment is $1,438. To take a four-month vacation, you would need to prepay $5,752 ($1,438 x 4).

While a mortgage vacation can provide a break from payments, interest still accrues and is added to the principal balance. This can result in thousands of dollars in additional interest. For instance, in the above example, after a four-month mortgage vacation, the mortgage balance would increase by at least $2,454 due to accrued interest. It's important to note that mortgage life insurance, critical illness insurance, and municipal tax payments still need to be made during the vacation.

Before considering a mortgage vacation, it's advisable to find out the prepayment options and penalties from your lender. Most financial institutions allow lump-sum prepayments of 10% to 20% of the original principal amount annually without penalties. Another option is a double-up payment, which is twice the regular monthly payment. It's essential to get permission from your lender and ensure you understand the terms and potential costs before taking a mortgage vacation.

Frequently asked questions