changing morgage to buy to let

Icey77

socrates wrote: »

Trust me you do not want to go anywhere near a BTL mortgage - at some point you will need to speak to an accountant.

Why would the OP have to talk to an accountant about a BTL mortgage?

I'm not trying to be difficult, simply confused as to why? I go to a mortgage broker about mortgages rather than an accountant?

socrates

Icey77 wrote: »

Why would the OP have to talk to an accountant about a BTL mortgage?

I'm not trying to be difficult, simply confused as to why? I go to a mortgage broker about mortgages rather than an accountant?

Read what I said correctly and you will understand.

I said do not go anywhere near a BTL mortgage.

The other part of the OP's question was about tax - that part they will probably need to speak to an accountant about - as their knowledge of taxes and relief seem limited.

knightowl_3

Dithering_Dad wrote: »

I did this and my mortgage interest was tax deductable. I rented out my house while I worked overseas and I had to fill out an overseas landlord tax return. In your case it'll be easier because you're not moving abroad.

As others have said, try to obtain 'consent to let' permission from yoru current mortgage provider, it'll be cheaper because you won't have to pay remortgaging costs (such as valuation fee and arrangement fee) and your mortgage rate will usually be lower than a BTL mortgage.

Tell your mortgage provider that you think it will be a temporary arrangement and that you'll be looking to sell the house once the market levels out. Otherwise there is a possibility that they will insist on you taking out a more expensive BTL mortgage product.

Make sure that you get Landlords buildings insurance (if you keep your existing insurance and your tenants burn the house down, you won't be able to claim), get your gas and electricity checks and you might also look at getting a management company at first if you are new to being a landlord.

As far as your tax relief is concerned, you are only allowed to claim for the original purchase price of the house. For example, if you bought a house for £38k and then built an extension with an additional mortgage of £25k. You will only be allowed mortgage tax relief on the original £38k mortgage, not for the new £63k mortgage.

Good luck.

Thanks for the wonderfull answer. I am relieved. But I dont get the last bit. I bought the house for 128k, owes the bank 60k. So I'll be paying interest for what is left i.e. 60k. I am not going to get any money out of it, simply change the current morgage. So question of what it was worth will not matter to me isn't it?
BTW, halifax offers 'consent to lease for 3yrs and they will simply extent it over and over again.

Forgive me for my ignorance, I had no idea about these things until i found this forum. I asked around from people where I work, they had no idea either. You guys are wonderfull.

socrates

knightowl wrote: »

BTW, halifax offers 'consent to lease for 3yrs and they will simply extent it over and over again.

They may offer it BUT are you eligible for it.

It depends on mortgage payment in relation to rent payment

Halifax have been known to agree in principle but withdraw later - there was a similar thread to this a week or so ago.

We need a few more facts - type of mortgage, monthly payment, expected rental income and any other facts

Pete111

Sorry Knightowl - got the wrong end of the stick from your original post

Like yourself and others on this post I have done this also with a mortgage via A&L on a flat I used to live in and yes it is immeasurably better than a BTL!!!!

I have also found that now I am coming round for renewal, A&L are happy to give me another fixed rate deal at normal residential rates despite knowing I am renting it out - fair play to them.

Looking at BTL rates, I would think that Consent to let is probably the only way a lot of landlords can expect to break even currently!

BTW, make sure you look into the other elements of letting your place out that are tax deductable - MSE has some useful pages.

Pete111

Icey77

socrates wrote: »

Read what I said correctly and you will understand.

I said do not go anywhere near a BTL mortgage.

The other part of the OP's question was about tax - that part they will probably need to speak to an accountant about - as their knowledge of taxes and relief seem limited.

Ahh, simply a grammar issue - the sentences read as though they were one and not split into replying to different two issues.

As I did say, I wasn't trying to be difficult!

knightowl_3

socrates wrote: »

They may offer it BUT are you eligible for it.

It depends on mortgage payment in relation to rent payment

Halifax have been known to agree in principle but withdraw later - there was a similar thread to this a week or so ago.

We need a few more facts - type of mortgage, monthly payment, expected rental income and any other facts

Type of morgage-standard variable 4.5% at the moment, 12yrs left

Monthly payament - 520GBP

Est. rental income 425GBP

We have a very good credit record.

socrates

knightowl wrote: »

Type of morgage-standard variable 4.5% at the moment, 12yrs left

Monthly payament - 520GBP

Est. rental income 425GBP

We have a very good credit record.

The rent in relation to mortgage may be your problem here - perhaps a broker on here can advise

m_13

knightowl wrote: »

Type of morgage-standard variable 4.5% at the moment, 12yrs left

Monthly payament - 520GBP

Est. rental income 425GBP

Based on these figures you are not likely to be paying much interest a month if your mortgage was the fairly standard 25 years to start out probably about £200 per month depending on the amount you borrowed in the first place. You will pay tax on the remainder of the rent less any allowable expenses (membership of a landlords' association, rental agency fees etc).

So if you rent out your property for £425 per month and pay £200 in mortgage interest (which decreases each year as you owe less) then you will have £225 extra income each month to declare. You can take allowable expenses off to reduce this. However, then you've got to pay to rent another property at full price somewhere else. You can't offset your new rent against your old property's rental income.

The value comes into play if you were releasing money from the house to buy a new one but that's not your intention.

silvercar

knightowl wrote: »

Thanks for the wonderfull answer. I am relieved. But I dont get the last bit. I bought the house for 128k, owes the bank 60k. So I'll be paying interest for what is left i.e. 60k. I am not going to get any money out of it, simply change the current morgage. So question of what it was worth will not matter to me isn't it?
BTW, halifax offers 'consent to lease for 3yrs and they will simply extent it over and over again.

Forgive me for my ignorance, I had no idea about these things until i found this forum. I asked around from people where I work, they had no idea either. You guys are wonderfull.

You bought the house for 128k, but that is not relevent now. What is relevent is its value when you first let it. Presuming that its value is now over 60k and 60k is all the borrowing you have, then the interest part of your repayments on the mortgage (but not the capital) are an allowable expense.