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  • FIRST POST
    • Melanie1980
    • By Melanie1980 10th Sep 17, 2:35 PM
    • 4Posts
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    Melanie1980
    Advice BTL stamp duty impact
    • #1
    • 10th Sep 17, 2:35 PM
    Advice BTL stamp duty impact 10th Sep 17 at 2:35 PM
    Hi,
    I currently own a two bed end terrace valued at £120,000 in the North West of England. My outstanding mortgage is close to £70,000.
    I am looking to move in with my partner and we are looking at our new home being between £250,000-£300,000.
    I earn an income that is £38k+ and pay the basic tax rate although due to extra working hours I can meet the 40% tax.
    I am unsure at the moment whether to rent my current home or sell it. I have been advised the rental income would be between £600-£650 pm.
    I would be looking at releasing approx £15,000 equity to put towards the deposit to my new home so the mortgage required on the rental property would go up to £85,000. (I'm lucky to have additional savings to bolster the deposit on the new home).
    I have looked at the changes to stamp duty and keeping my current home would substantially increase the amount of stamp duty I need to pay for my new home with my partner,I will pay all of the increase as it wouldn't be right to expect my partner to pay for the increase.
    I am looking to speak to a mortgage broker but am worried they will encourage any deals towards btl due to commissions.
    I could sell the house and look to invest additional capital elsewhere.
    Any advice as to whether paying the additional stamp duty to keep this house as a btl is a good idea financially?
    I will be looking into all the costs Inc management fees etc but paying out the higher additional stamp duty on my new home is making me think twice.

    Thanks
Page 1
    • phillw
    • By phillw 10th Sep 17, 3:28 PM
    • 801 Posts
    • 400 Thanks
    phillw
    • #2
    • 10th Sep 17, 3:28 PM
    • #2
    • 10th Sep 17, 3:28 PM
    I will be looking into all the costs Inc management fees etc but paying out the higher additional stamp duty on my new home is making me think twice.
    Originally posted by Melanie1980
    If you still go ahead with it and change your mind later, you have three years to sell your current property and reclaim the additional stamp duty.

    You will have to pay any capital gains tax on the increase in those three years (although it may even be less than your allowance) and obviously income tax on the rental. Which if you're earning more than £56,500, will be 40% of it.

    https://www.gov.uk/government/publications/stamp-duty-land-tax-apply-for-a-repayment-of-the-higher-rates-for-additional-properties

    Whether it's worth it depends on your situation now, where you think you'll be in the future and what you think will happen to property prices in the future.
    Last edited by phillw; 10-09-2017 at 3:33 PM.
    • PField
    • By PField 10th Sep 17, 4:19 PM
    • 77 Posts
    • 52 Thanks
    PField
    • #3
    • 10th Sep 17, 4:19 PM
    • #3
    • 10th Sep 17, 4:19 PM
    Remember selling also comes with fees. Estate agents and solicitor fees may be equivalent to the addition stamp duty.
    • Melanie1980
    • By Melanie1980 10th Sep 17, 4:29 PM
    • 4 Posts
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    Melanie1980
    • #4
    • 10th Sep 17, 4:29 PM
    • #4
    • 10th Sep 17, 4:29 PM
    Thanks phillw.
    I think i'm second guessing the decision as an increase in stamp duty by 7.5-9k seems a lot when it's nearly 10% the cost of the overall mortgage value. If I keep my current home I understand it's history and when any costs may be incurred eg.new boiler,ongoing maintenance.
    If I sell I save stamp duty on the joint home with my partner but will need to look at investing the equity again and there's not many options outside of property except for stocks/shares which i'm starting to read up on. I understand with all Inc houses there's always a risk.
    • Cakeguts
    • By Cakeguts 10th Sep 17, 5:04 PM
    • 2,725 Posts
    • 3,725 Thanks
    Cakeguts
    • #5
    • 10th Sep 17, 5:04 PM
    • #5
    • 10th Sep 17, 5:04 PM
    What I would suggest is that you have a look at Rightmove for 2 bed terraced rental properties in the area that your house is in. If there are a lot available then you could find that the rental for your house is £600 to £650 if you can let it. It is worth knowing this because it will also tell you if you are likely to have a lot of voids when you will still have to pay the mortgage but won't have any rent coming in.
    • Melanie1980
    • By Melanie1980 10th Sep 17, 5:20 PM
    • 4 Posts
    • 0 Thanks
    Melanie1980
    • #6
    • 10th Sep 17, 5:20 PM
    • #6
    • 10th Sep 17, 5:20 PM
    Thanks Cake guts.
    There's a lack of property for sale in the area at my house value,only 10 at the moment,down from 20+ and I'm told houses are selling quickly, although i know agents will say that ha.
    The amount of rentals has gone up from an average of 13 to over 20 but none have been listed for more than 6wks really, mainly less tHan a month. Again i'm told rental properties are in demand. I'm close to the M60 and walking distance to a main train station to and surrounding Manchester.
    As another post says it's likely fees to sell etc may end up similar to what my increased stamp duty will be. Plus I could give it a try and maybe sell within 3yrs if I realise it's not for me longterm.
    Thanks for posts so far.
    • Cakeguts
    • By Cakeguts 10th Sep 17, 10:02 PM
    • 2,725 Posts
    • 3,725 Thanks
    Cakeguts
    • #7
    • 10th Sep 17, 10:02 PM
    • #7
    • 10th Sep 17, 10:02 PM
    Thanks Cake guts.
    There's a lack of property for sale in the area at my house value,only 10 at the moment,down from 20+ and I'm told houses are selling quickly, although i know agents will say that ha.
    The amount of rentals has gone up from an average of 13 to over 20 but none have been listed for more than 6wks really, mainly less tHan a month. Again i'm told rental properties are in demand. I'm close to the M60 and walking distance to a main train station to and surrounding Manchester.
    As another post says it's likely fees to sell etc may end up similar to what my increased stamp duty will be. Plus I could give it a try and maybe sell within 3yrs if I realise it's not for me longterm.
    Thanks for posts so far.
    Originally posted by Melanie1980
    6 weeks is a long time if you are looking for a tenant or are between tenants. Can you afford to pay the mortgage if you are not getting any rent because a tenant has stopped paying? You might have to do this for more than 6 months because that might be how long it takes for you to get the court date for the hearing for possession. Also allow for the fact that a tenant could wreck the property.

    See if you can find out if any of the 2 bed properties that were advertised for sale are now being advertised to let instead.

    I am a landlord and let property in Greater Manchester. We let mostly modern 3 bed semis because they let much more easily than 2 bed terraced properties as there is a shortage of 3 beds and no shortage of 2 bed terraced houses which is why I am suggesting that you find out as much as possible about letting a 2 bed terrace before you try it.
    • dimbo61
    • By dimbo61 10th Sep 17, 10:30 PM
    • 9,456 Posts
    • 5,124 Thanks
    dimbo61
    • #8
    • 10th Sep 17, 10:30 PM
    • #8
    • 10th Sep 17, 10:30 PM
    You have £50,000 tied up in a property and that along with your deposit money could give you a 25 or even 40% deposit !
    Tax changes coming in could mean you make No profit from renting
    Being a Landlord can be a pain in the !!!
    • Melanie1980
    • By Melanie1980 10th Sep 17, 11:03 PM
    • 4 Posts
    • 0 Thanks
    Melanie1980
    • #9
    • 10th Sep 17, 11:03 PM
    • #9
    • 10th Sep 17, 11:03 PM
    Cakeguts/dimbo61 many thanks.
    I have been thinking about it for a while due to an interest for many years however the decision is now nearer as my partners property is going on the market this month. I had researched it but still felt unsure.
    This forum has helped significantly today having never used a forum before. I have also looked through many questions posed on the forum previously. Advice from actual landlords has been beneficial.
    I think I was going into it with rose tinted glasses when usually i'm sensible with money (overpaying mortgage when possible). I was looking at a btl as an investment answer as an alternative to poor savings rates,it's not likely to be the results I was hoping for.
    I am going to look into alternatives based on advice today and on previous threads,some by Cakeguts ha.
    Thanks again for the posts, time to spruce it up a little for sale I think!
    • Crashy Time
    • By Crashy Time 11th Sep 17, 4:46 PM
    • 4,790 Posts
    • 2,104 Thanks
    Crashy Time
    http://everyinvestor.co.uk/2017/09/05/is-buy-to-let-borrowing-about-to-get-tougher/
    • phillw
    • By phillw 11th Sep 17, 6:43 PM
    • 801 Posts
    • 400 Thanks
    phillw
    I was looking at a btl as an investment answer as an alternative to poor savings rates,it's not likely to be the results I was hoping for.
    Originally posted by Melanie1980
    It's always difficult to know what the long term return is going to be on an investment.

    One thing you can guarantee, there will be percentage fees wherever you put your money.
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