Advising mortgage lender that you are now letting property

stoker48

My son lives in a flat that we purchased outright ie no mortgage on it. He has been there for 5 years.
We are now thinking of buying another flat and renting out the current one. We are thinking of applying for a mortgage on the current flat and think that it will be better from a tax point of view ie rental will be coming in and then going out on mortgage repayments so no unearned income. We would then use the mortgage money for the new flat (plus an additional hefty amount which we have saved) so would not need mortgage on new flat.
Trust this makes sense. My query is this - when applying for a mortgage on the existing flat should we tell the lender that we intend to let the property soon? If so they may ask us to take out a Buy to Let mortgage instead of a residential one. Buy to let mortgages are more expensive. I am worried that if we dont tell them and they subsequently find out that we are letting (and so soon after applying for the mort) there will be consequences!!
All advise very gratefully received.
Thanks

opinions4u

You tell the truth when applying for mortgage funds.

Anything less than that is fraud.

Thrugelmir

If you are remortgaging a property that you don't occupy to buy another. Don't you think that it gives the game away that this isn't a residential house purchase transaction?

_Andy_

Why is telling the truth seen as passe these days?

FraudBuster

_Andy_ wrote: »

Why is telling the truth seen as passe these days?

Following the lead of politicians.

getmore4less

Tax relief is only on the interest not the full mortgage payment.

The debt does not have to be secured on the same property to qualify for tax relief.

So you should be able to keep the rental mortgage free and still borrowe and get the tax relief.

Who will live in the new flat?

Then if the new place qualified for residential there would be fewer problems.

stoker48

We were going to rent out via an agency. The rent would pay the mortgage. The cash raised from the mortgage would go towards another property that my son would move into. He is currently living in the existing flat. As I explained earlier this flat does not have a mortgage on it at present. We just thought that if we now intend to rent it out, having a mortgage on this flat (as against the flat we are hoping to buy now) would be more tax efficient.
I assumed that a Buy to Let would be the best option but it was actually someone in the Estate Agents (who was aware of all the facts) who said get a residential one. I felt a bit unsure of this which is why I have put it on the forum for debate!
Appreciate everybodys input.

Chinkle

If EA was aware of all the facts he's either ignorant or encouraging you to commit fraud. Doesn't sound like the kind of agent you'd want to be working with.

stoker48

"

getmore4less wrote: »

Tax relief is only on the interest not the full mortgage payment.

The debt does not have to be secured on the same property to qualify for tax relief.

So you should be able to keep the rental mortgage free and still borrowe and get the tax relief."

I was totally unaware that we could remortgage our own family home and use that to purchase another property! Also very suprised that we could rent out our existing flat (that my son lives in) and qualify for tax relief on the new mortgage that we take out on the family home. It does not make sense to me but if the Taxman is happy with it, great.

If I had not posted my original comment onto this site I may have gone down a wrong route and I certainly would not have been aware that we could remortgage where my husband and I live.
:rotfl:Thanks

getmore4less

You still need to do it correctly so check it out with someone qualified or read up the tax rules on HMRC web site.