basic help need with BTL

costingbunny_2

Hi
I am considering buying a property to let but am unsure how this all works. This is my position:
Live in a mortgaged home (owe £110,000 and property is worth around £200,000). My mortgage is a tracker and is currently 1.49% (ING). I overpay by £350 a month at present following the interest drops.
Looking to buy somewhere to rent as an investment (around £75,000) but not sure how/where/which funds to use.
We have some equity in the home but if we want this would we need to re-mortgage and therefore change to teh current mortgage product of ING which is higher with a fee?
We have some savings, of which £20,000 which we can use.
We have a credit card at 0% with £10,000 credit limit
Do we need a BTL mortgage for remainder?
Sorry for all the questions but this is all new to me? Aside from answering my questions as to the buying process and funds - is this is a good idea??
My thinking is to stop overpaying my mortgage and this, together with a bit more, will pay the mortgage on the new property, in the event we cannot rent it out all the time etc.

Thoughts?????????????

Dan_1976

I would be very careful about raising money on your own home to buy an investment.

In normal conditions you would borrow as much as possible subject to the rental icome meeting lenders criteria. This would allow you to take advantage of tax rules.

However times have changed so I imagine 75% would be about the limit, but I would check.

You could raise the deposit on your current home and that is as much as I would. YOu could use 50% savings 50% further advance on your mortgage from your current property. then borrow the rest on the new property. You may be able to borrow the extra from ING on a new rate or product without losing the current.

I like the fact you have the money if you cant rent it. This was always a big issue with amateur landlords. Do plenty or research in to the property and area you want to buy. Although you have the money you really need to keep it let.

Thrugelmir

Only invest what you can afford to lose. BTL is a business not a hobby.

You need to understand all the implications of investing in BTL, i.e. finance, being a landlord, taxation rules.

Also have a clear objective of what your aim is. How will the capital debt be repaid? The days of relying on a capital gain for a return has been and gone.

getmore4less

what would this £75k property rent for?

Dan_1976

Gorgeous_George wrote: »

I can't see that it matters where the funding is secured. And paying two arrangement fees would be folly.

GG

As previously said, this is a business transaction and you keep your family home as far away from it as pos.

Rather pay another fee than lose my house?!?!

Thrugelmir

getmore4less wrote: »

what would this £75k property rent for?

Question is better phrased, does the after tax profit from renting generate sufficent cash to repay the capital owed on the BTL mortgage.

Dan_1976

Depends how its run. I would still keep it higher on the actual BTL as it would have better tax advantages.

Dan_1976

Depends on the OP's situation we know little about it so I am giving my opinions and options to think about.

costingbunny_2

Dan_1976 wrote: »

Depends on the OP's situation we know little about it so I am giving my opinions and options to think about.

Thakns for the responses although I am a bit scared by the some of the comments as I don't understand them!
The property would rent out for around at least £400 pcm.
My mortgage company have agreed that I could borrow £30,000 (based on my valuation of the property) although I would hope to get £40,000 and this might be possible. I would borrow this on a new product but my old mortgage would be on the same product. This means I would pay a fee of £595-£995 depending on what I chose. I think this extra would mean payments of around £270-£300 (very rough calcs).
Adding on this debt means we would still have equity in the house of around £50K.
Is there some tax implication if I dont use a BTL mortgage?
I am thinking of trying to get the property for £70K and use £40K from ING, use £20K savings and (gulp) put £10K on the 0% credit card. I do have enough savings to avoid using the credit card but I would have no funds left then?
Please someone tell me that this is a good idea as the posters have scared me!!

Dan_1976

Income tax, the income from your property will be added to your income, so if your higher rate taxpayer it may be worth worrying about. As GG says, rates may mean its not worth worrying about, however rates can change, tax will always be there and it aint going down!

The HMRC site is useful.

costingbunny_2

[I am a higher rate tax payer but my partner is not (we are not married) - could he have the property in his name???