Advice with mortgages

fumken

I have an offset mortgage on a 3 bed house, mortgage 40k, value 280k. Currently letting at £1150pm. I temporarily rent in a not so nice area where I live and work for £400pm. I am looking at buying in a better location, is seems silly that I get nothing tax wise and depriving myself of a good quality of lie, especially as the tenant as been a nightmare.
My thoughts are:

1. Re-mortgage for a BTL 80k to free up 40k for deposit and moving.
2. Buy (in Kent) approx 240K.

3. Sell current house asap - tenants been evicted S21 when done, pay off the new mortgage or as much as possible - so it should be a mortgage flexible enough for that.
4. Now will be left with 80K BTL mortgage. Buy another BTL flat as an investment with a re-mortgage BTL loan say 120k, rent of £700.
I can see that I will have to pay a few fees, but does this seem reasonable?

JA1000

Seems a very complicated way of doing it but I don't think your explanation is very clear, no income details etc.

Why not sell the house and just buy somewhere for £240k mortgage free??

fumken

I earn 50K no other debts (besides the rental income of £1150). I just cannot wait to move and I feel I may miss out on a house I like. Sorry if it sounds complicated.

JA1000

So you have no deposit for new place. Why not just move and rent somewhere else whilst you wait for house to be sold.

This way you move immediately or within a month and you will save the fees.

Fairdo_2

Don't know if I am missing the point here, but if you have an offset mortgage and that property is currently let out, you would have obtained a "consent to let" I presume?

Therefore, if they know the situation and you have an offset mortgage, potentially with a pre-agreed limit, then could you not ask the offset lender for the money to use as a deposit, as the money is probably yours to take anyway?

Then you can do what you want with the property, sell it or let to a better tenant.

You could then be in a position to take out a "Let 2 Buy" mortgage on the basis that the rental income could be sufficient to negate the ongoing liability of the current mortgage and you can have a new residential mortgage based on your earned income alone!

Not sure what you mean about the current tax issue, but the above may be an option worth exploring.

If I am on the wrong track, please forgive me, it has been a long day and still lots to do!

fumken

Fairdo wrote: »

Don't know if I am missing the point here, but if you have an offset mortgage and that property is currently let out, you would have obtained a "consent to let" I presume?

Thanks for the response. I have consent to let but if I am correct, I do not get any allowances from my rent paid out and I also do not get any benefit from the offset, since it reduces the interest I pay and it is a prepayment mortgage. So I feel a BTL is better.

I have some money for fees but I would like to increase my deposit on the new house to get a better deal, although it seems the way forward is to do the BTL only once and arrange another mortgage for the new house. I dont want to move out and rent again. Although I dont like the area, it is good value as some rent here for £650-700 and the rent in my desired area is abour £1000. I will prefer to wait or buy and I have seen a couple of houses I like.

getmore4less

fumken wrote: »

Thanks for the response. I have consent to let but if I am correct, I do not get any allowances from my rent paid out and I also do not get any benefit from the offset, since it reduces the interest I pay and it is a prepayment mortgage. So I feel a BTL is better.

I have some money for fees but I would like to increase my deposit on the new house to get a better deal, although it seems the way forward is to do the BTL only once and arrange another mortgage for the new house. I dont want to move out and rent again. Although I dont like the area, it is good value as some rent here for £650-700 and the rent in my desired area is abour £1000. I will prefer to wait or buy and I have seen a couple of houses I like.

It is the interest rate that is important not the type of debt to how much you make from the rental.

You can offset interest on debt up to the value of the property when it was first let if you arrange things properly.

Thrugelmir

fumken wrote: »

Thanks for the response. I have consent to let but if I am correct, I do not get any allowances from my rent paid out and I also do not get any benefit from the offset, since it reduces the interest I pay and it is a prepayment mortgage. So I feel a BTL is better.

Paying tax is actually a sign of a profitable venture. While minimising tax liability is of course a must.

BTL isn't a one way game on capital appreciation. ( Expect increases in CGT in the post election budget). The idea is to clear the debt , to release and generate cash to invest into further investments.

fumken

Thanks both. I did not know I could work it out myself. I thought it had to be waht I actually paid. From what you say, it may be best to sell now pay off the CGT and start afresh.