Can I rent out my house and buy another with my bf?

reissgirl

Hello moneysavers

My bf and I are desperate to buy a new place together. We've put both our current homes up for sale but mine won't sell, in fact no interest at all in the last 8 weeks. My bf however has had quite a bit of interest and just had an offer which he's thinking about accepting.

So we are thinking about renting my house out instead. My mortgage is roughly £250 and would rent out for around £500 per month. I've also spoken to the bank about them letting me rent it out and everything is fine.

My question is will the fact that I have another mortgage impact my chances of getting a joint mortgage with my partner? We have a 15% deposit without me selling my house, but if I sold we would have a 25% deposit for the new house.

Thanks for your help.

Mini_Bear

If your income is critical to the purchase and affordability of the mortgage then yes - it will be a problem. The bank will look at affordability, if your tenants left, could you pay two mortgages? and also if interest rates went up would the rent still cover the mortage?
Sorry to be a doom-monger but i have seen friends in this position - ALSO, what a lot of people seem to forget is that you must declare all rental income (regardless of whether it covers your mortgage or not) and pay tax on it at the highest rate you are on (its considered a second income). Renting houses out doesn't seem as easy after that!
Godd luck whatever you decide - as you have equity in your current property can you not be a bit more flexible on the price, and have you quizzed your estate agent on why there has been no viewings?

Hammyman

Yes you can. I'm doing this and so is my brother. The fact you'll have two mortgages is irrelevent as long as the income is sufficient.

reissgirl

Thanks Hammyman, that sounds promising. Who are you getting your new mortgage with, out of interest?

Thanks too Mini Bear, I know renting property out isn't always easy but my father has a large buy to let portfolio so will seek his advice. I thought you only paid tax on any income which is above the interest only element of the mortgage though?

00ec25

reissgirl wrote: »

I thought you only paid tax on any income which is above the interest only element of the mortgage though?

in the specific case of the mortgage interest you are correct, but there is a lot of shorthand on this board
the a slighlty fuller statement would be you will pay tax (at your marginal tax rate) on the net profit, ie rent minus allowable expenses, of which mortgage interest is one of many allowable expenses that reduce your gross income and result in the net profit figure

Hammyman

reissgirl wrote: »

Thanks Hammyman, that sounds promising. Who are you getting your new mortgage with, out of interest?

Thanks too Mini Bear, I know renting property out isn't always easy but my father has a large buy to let portfolio so will seek his advice. I thought you only paid tax on any income which is above the interest only element of the mortgage though?

Mortgage Works for the "let to buy" rental (yes that's the right way round - we released equitey to get a 25% deposit) as our mortgage company wouldn't let us rent out. Abbey for the new house.

madeupname1

Agree with Hammyman. In my case, once the mortgage company were satisfied that rental income adequately covered the mortgage payments on the first property (i.e. that it was self financing) that was all they wanted to know. At that point the first mortgage was taken out of the picture in its entirety (i.e. the mortgage payment was not included as one of my monthly outgoing and the rental payment was not included in my total income).

white_noise

me and my girlfriend are doing this, its her house and i am a first time buyer, she is keeping here house and renting that out, and we are buying a house together.
we went into her bank and they are happy that the rent will cover the mortgage and she can keep the house and we have a mortgage in principle
my concern is making sure that she doesn't stretch herself too far just in case anything goes wrong with her house (i.e the boiler blowing up)
WN