Let to buy or remortgage?

berbasulk

I am lucky enough to be living mortgage free in my own property.

However I would like to move to somewhere a bit bigger without selling my current property.

I have a substantial deposit to put down. The question is what is the most efficent way of raising the finance to buy a second property?

I have looked at let to buy i.e take out a mortgage on the property I want to buy and allow the rent from the house I currently own to pay the mortgage.

However some friends have indicated that I would be better off remortgaging my current property to raise the capital to buy the new one. It's more tax efficent apparently but is this really the case?

Any advice welcomed.

Thanks.

herbiesjp

If you bouught via your own funds, it will be a normal residential mortgage you will require

Your income will have to be high enough to support the mortgage you will need on the second property.

You could also raise funds from the first property, on a Buy To Let basis.

This mortgage would be agreed not on the basis of your own personal income but on the basis of the expected rental income on the property.

berbasulk

O.k so if I took out a buy to let mortgage on the property i currently own in order to raise the funds how would I go about working out how much I could borrow? And would this be more tax efficent?

herbiesjp

As I understand it, it is the reason for the mortgage that dictates whether or not you can claim the mortgage interest as an expense

So, if mortgage is to purchase another investment prioperty, then yes it is.
However, if mortgage is to purchase a residential property then no it isn't

Happy to be corrected if wrong.

Maximum you could raise is 75% on the first property, assuming the rental income covers the mortgage payments by around 130% (this 130% cover varies from lender to lender due to their own calculations, so you need to look around at who offers you the best covergae and rate)