Buy to Let Mortgage advice

fuglyjowls

Hi all hope someone can advise. My husband has recently inherited his mother's house and we are thinking about letting it out until the market has picked up at some future point (hopefully when we retire!).

We think that we would be better off taking out a mortgage on that house and paying off our current mortgage with it so that we then wouldn't pay tax on the rental income (unless it was more than the monthly cost of the mortgage). However we are not sure whether we would need to get a buy to let mortgage and what are the pitfalls of this?

Any advice would be welcome.

FJ

Mateus_2

Hi

I believe you should have a buy to let mortgage to pay off your own mortgage. First as you say you pay less tax on the rent received and also as you know if you sell the buy to let property you will have to pay capital gains tax on the profit. Therefore, if you a mortgage on there only after the mortgage is paid the capital gains tax kicks in and if you sell your own property as you know you do not have to pay any CGT. Also if in case something very bad happens and you can pay the mortgage will not be your property that will be repossessed but the buy to let (knock in the wood )

Cheers
Goncalo

fuglyjowls

Thanks for reply - you have clarified what I thought but I would like to know if there are any disadvantages to having a buy to let mortgage and what they are. Or could we get an ordinary mortgage and still let the place out or would the lender not like that?

Thanks

FJ

EdInvestor

The basis for BTL mortgages is different: the loan to value is usually lower (max 85% possibly less these days) and you have to show that the rent receivable will be something like 125% of the mortgage payment.

The interest rate may also be higher. Your thinking is correct though.

Use a broker and shop around.

dimbo61

Taking out an ordinary mortgage and then renting out the property is fraud and your lender could demand the mortgage money back.
So do it legally and get an accountant
See how much you could rent it out for and what needs to be done to the property before you can rent it out ( lots of rules and regs ) central heating serviced and checked, electrics checked , buildings and contents insurance ETC
Go for an interest only mortgage and you can offset the mortgage costs against you tax bill from the rental
speak to an accountant/tax adviser