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Mortgages - HELP
LYT_2
Posts: 37 Forumite
We bought a house 4.5 years ago £193000, took a mortgage for £173000 for 25 years and we now have £60000 outstanding (includes £50000 overpayment we have made). Monthly payments are now £335 and our house is now worth £215000. This mortgage is 2.79% above Bank of England base rate which will be renegotiated in Nov 2011.
We don't want to move house as even though we don't like the area, it is very conveniently located for nursery and work. However the monthly payments have gone down so low that we are not stretched and it feels like we are not making the most with our money.
So we thought we should by another property and after a few months looking, we have found a 2 bed flat (brand new) for £265000. It is not far from where we currently live so we could live in either property and either pay both mortgages or end up letting one of the properties out.
On our current mortgage, we applied for additional loan to see how much we could get (in case it would make sense to give a higher deposit for the new flat) and A&L accepted to give us an extra £63700.
Initially we thought we would get a new mortgage for the flat using the £50000 overpayment from the current mortgage as a deposit but now we realise we have a few options and we are not sure which one is best:
1) Keep the current mortgage on the house (they can issue a "consent to let" letter if we do decide to rent) and get a new "normal" mortgage on the flat. The flat would be considered as a holiday home (so we need 20% deposit which is nearly covered by the £50000) and in case we decide to rent this one, we end to be sure that the lender will issue a "consent to let" letter.
2) Same as above but we take the additional £63700 (or part of it) to have a bigger deposit for the flat
3) Transfer our current mortgage to the flat and remortgage the house. Again with £50000 or more?
4) Decide beforehand where we want to live and get a "buy to let" mortgage for the other property
Any idea on the best option? If one makes more sense from a financial stand-point, we can be flexible.
If we do let one of the property out, how does it work from a tax point of view? Do we have to declare the income? Can we deduct the mortgage interest?
Thanks a lot!
We don't want to move house as even though we don't like the area, it is very conveniently located for nursery and work. However the monthly payments have gone down so low that we are not stretched and it feels like we are not making the most with our money.
So we thought we should by another property and after a few months looking, we have found a 2 bed flat (brand new) for £265000. It is not far from where we currently live so we could live in either property and either pay both mortgages or end up letting one of the properties out.
On our current mortgage, we applied for additional loan to see how much we could get (in case it would make sense to give a higher deposit for the new flat) and A&L accepted to give us an extra £63700.
Initially we thought we would get a new mortgage for the flat using the £50000 overpayment from the current mortgage as a deposit but now we realise we have a few options and we are not sure which one is best:
1) Keep the current mortgage on the house (they can issue a "consent to let" letter if we do decide to rent) and get a new "normal" mortgage on the flat. The flat would be considered as a holiday home (so we need 20% deposit which is nearly covered by the £50000) and in case we decide to rent this one, we end to be sure that the lender will issue a "consent to let" letter.
2) Same as above but we take the additional £63700 (or part of it) to have a bigger deposit for the flat
3) Transfer our current mortgage to the flat and remortgage the house. Again with £50000 or more?
4) Decide beforehand where we want to live and get a "buy to let" mortgage for the other property
Any idea on the best option? If one makes more sense from a financial stand-point, we can be flexible.
If we do let one of the property out, how does it work from a tax point of view? Do we have to declare the income? Can we deduct the mortgage interest?
Thanks a lot!
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