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What property to mortgage
rebeccaw
Posts: 1 Newbie
My husband and I own a house with no mortgage. It is worth around £370,000. We have been thinking of moving to a smaller property and releasing some capital to buy a second property to rent out.
However, we have now seen the house that we want to buy to live in. It is on the market for £200,000 and requires about £50,000 to be spent on it and we estimate that the work will take about 6 months.
Our house is on the market but we have not sold yet. We would like to get a mortgage to purchase the new house but are confused about the best way/cheapest way to do this.
As far as I can see we have 2 options
1) Get a mortgage on our existing house which we have lived at for 5 years (is this a remortgage even though we don't have a mortgage) for £200,000 on interest only basis to fund purchase and use savings/loan from parents for renovation.
We're thinking of doing this in case we can't sell the house we currently live in and have to rent the new one out after renovation.
I understand that we could set the cost of our mortgage against the rent received on the 2nd house for tax purposes.
If we sell our house we will either have to transfer mortgage over (to use it/some of it to buy rental property) or repay it in full so there will be penalties.
2) The other option would be to get a mortgage (£150,000) on the house that we want to buy and fund renovations from savings/loan from parents. If we sell our current house we can pay off mortgage again with penalties or use it/some of it to buy rental property.
However, I am concerned about what will happen if we don't sell our current house and have to rent out new house which has mortgage on it.
I understand that some lenders won't give you permission to let it out or if we wanted to change it to a buy to let it may be expensive to do this.
--
Any advice would be gratefully received on which option is better,things we haven't considered or which lender may be best for us. Thanks.
However, we have now seen the house that we want to buy to live in. It is on the market for £200,000 and requires about £50,000 to be spent on it and we estimate that the work will take about 6 months.
Our house is on the market but we have not sold yet. We would like to get a mortgage to purchase the new house but are confused about the best way/cheapest way to do this.
As far as I can see we have 2 options
1) Get a mortgage on our existing house which we have lived at for 5 years (is this a remortgage even though we don't have a mortgage) for £200,000 on interest only basis to fund purchase and use savings/loan from parents for renovation.
We're thinking of doing this in case we can't sell the house we currently live in and have to rent the new one out after renovation.
I understand that we could set the cost of our mortgage against the rent received on the 2nd house for tax purposes.
If we sell our house we will either have to transfer mortgage over (to use it/some of it to buy rental property) or repay it in full so there will be penalties.
2) The other option would be to get a mortgage (£150,000) on the house that we want to buy and fund renovations from savings/loan from parents. If we sell our current house we can pay off mortgage again with penalties or use it/some of it to buy rental property.
However, I am concerned about what will happen if we don't sell our current house and have to rent out new house which has mortgage on it.
I understand that some lenders won't give you permission to let it out or if we wanted to change it to a buy to let it may be expensive to do this.
--
Any advice would be gratefully received on which option is better,things we haven't considered or which lender may be best for us. Thanks.
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