Renting my house and using equity to buy

ecclesto

Will have to get a btl mortgage when decide to buy a house so will have to face up to it sometime but don't see any sense in paying the building society annual fees and an increased mortgage fee when got the money in the bank. Apparently, will have to pay around another £16 a month on £5000 if I take out a btl when I do eventually move but don't know when this is going to happen. I am going to rent a room in a house and my tenants want to stay put for at least 2 years maybe 3 so in a bit of a quandry.

A_Nice_Englishman

As you seem happy to share a house, why not sell your existing one, buy one in your new location and get lodgers who will provide you with a tax free income using the rent a room scheme ?Invest this plus any surplus from your salary in whatever ways you wish.

These investments can be as risky or as 'safe' as you wish and you can easily access your capital and/or change your investment mix to suit any changes in circumstances.

ecclesto

I have had valuations on my own house but not enough to enable me to buy in the location I want. Plus will probably have to move the end of June and no chance in selling mine so soon. Hoping that house prices will improve in the next couple of years and in the meantime should be able to save up some money towards a deposit

new_home_owner_3

ecclesto wrote: »

Will have to get a btl mortgage when decide to buy a house so will have to face up to it sometime but don't see any sense in paying the building society annual fees and an increased mortgage fee when got the money in the bank. Apparently, will have to pay around another £16 a month on £5000 if I take out a btl when I do eventually move but don't know when this is going to happen. I am going to rent a room in a house and my tenants want to stay put for at least 2 years maybe 3 so in a bit of a quandry.

Yes it may be 16 pound a month, but where will you get the deposit for your next purchase?

ecclesto

I will have to get a buy to let on my existing house to get the deposit for my new house and I know that will cost me another £16 a month on the £5000 I owe at the moment. I think I will probably not even look for a new house for 12 months and will enjoy not having to maintain a 4 bedroom house for a change!! In those 12 months, hope to save at least £6000 and will be paying £115 per month off the existing mortgage. Don't know if that has any bearing on the situation.

zzzLazyDaisy

Remember that you will have to pay tax on any rent you receive, and submit an annual tax return, although some items are deductable such as interest on a mortgage.

ecclesto

Am I correct in thinking you are allowed to rent your house and the first so many thousand is elligible for tax relief, somewhere the first £4,800 springs to mind as being free from tax?

getmore4less

ecclesto wrote: »

Am I correct in thinking you are allowed to rent your house and the first so many thousand is elligible for tax relief, somewhere the first £4,800 springs to mind as being free from tax?

No you are thinking rent a room.

getmore4less

Just do the numbers.

rent £700pm

£170k borrowings required(or is the new place going to be more than this?.

£17k salary so 4* £68k on residential say 4% £226pm
£102k on BTL say 5% £425pm

£651 just covers the interest unlikely the £50 left will cover costs so you will probably be needing to use some income to support this.

Note this is interest only if you want to pay off this debt in 10 years you need another £1000pm.

Pure property speculation and the rental property value increases will be subject to CGT.

Think the other way, why have you not gone out and bought a £170k house to rent before? Why is this suddenly a good idea?

getmore4less

ecclesto wrote: »

Have had nightmares about all this! Phoned my building society and they said once I had tenants in they would charge me £125 annual fee for the first year and £105 each year after and add 1% to my interest rate for the btl part of the mortgage. Thinking of paying off the £5000 I owe with money in premium bonds which is doing absolutely nothing at all for me and then don't have to mess with the building society. Have decided to rent a room in a house when I move which will enable me to save quite a lot of money and give me breathing space to look around for a house.

But will they give you more money on those terms if you want to raise capital to buy somewhere else?

If you want to get lodgers on rent a room you need to keep this as your main residence