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Getting a mortgage on one flat to buy another property to let out - good idea?
orangeslimes
Posts: 470 Forumite
A friend of mine owns a flat outright that is worth around £250,000. He was thinking that he could get a mortgage on the this flat and use the money to buy another property that he could rent out and earn a bit of money from.
He has a steady, middle of the road income, but not that much in savings.
Anyone have any input on whether that is a good idea? Or any possible problems?
He has a steady, middle of the road income, but not that much in savings.
Anyone have any input on whether that is a good idea? Or any possible problems?
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It's fine in principle.
A lender like the Mortgage Works will lend based on the rental income exceeding the interest-only mortgage payments by 25% and won't worry too much about the personal income. He does need to bear in mind it's HIS home that's at risk of he doesn't pay the mortgage though!
The mortgage interest, together with any letting costs and maintenance expenses can be offset against the rental income for tax purposes.
As a new landlord, your friend should spend some time getting acquainted with the legal requirements he faces before he gets too far forward.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
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I assume that his flat is on a long lease? If so, I think he may have difficulties obtaining a mortgage on it if the remaining term on the lease is too short e.g. less than 75? years. I might be wrong but it's an angle worth looking into.0
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I assume that his flat is on a long lease? If so, I think he may have difficulties obtaining a mortgage on it if the remaining term on the lease is too short e.g. less than 75? years. I might be wrong but it's an angle worth looking into.
The flat is in Scotland where I think land ownership is different and the whole lease thing doesn't apply. (I could be wrong, don't know much about it)0 -
As you may realise if you read a lot of the posts here, there is much more to being a landlord than earning money!0
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orangeslimes wrote: »A friend of mine owns a flat outright that is worth around £250,000. He was thinking that he could get a mortgage on the this flat and use the money to buy another property that he could rent out and earn a bit of money from.
He has a steady, middle of the road income, but not that much in savings.
Anyone have any input on whether that is a good idea? Or any possible problems?
Hi OrangesLimes
Right, the first point of call is for your friend to speak to a good independent financial advisor, broker - for a good one, you will need to read the online reviews and ask people that you know if they know of a quality person for the task.
An independent broker is best as they will not be tied down to any particular lender. The broker should work with your friend on his figures to make sure they all stack up. Also if he is buying a buy to let then the mortgage will be a buy to let mortgage which normally carries a higher rate of interest.
I hope this helps, Oliver Green
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Not the case. He's remortgaging his residential property.Oliver_Green wrote: »Also if he is buying a buy to let then the mortgage will be a buy to let mortgage which normally carries a higher rate of interestI am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0
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