Adding a Buy to Let onto my current Offset Mortgage

Gian

Hi,
I'm after some advise. I currently have an one account offset mortgage and I’m thinking about buying a flat as an investment.
Been looking at buy to let mortgages (2 year fixed). all of these mortgages seem to be over 4% and over 2k in fee's!!
if I added this to my current mortgage I have no fee's and a lower interest.
would I get taxed on the full rental income if I did it this way?
Help...

Thrugelmir

Do you have sufficient equity in your current property to release the funds for the purchase?

That's on the basis that your existing lender is agreeable as well.

Gian

thanks
yes i sufficient equity and if i do pay for the flat out of my current mortage the interest rate will still stay at 3.65

HappyMJ

Gian wrote: »

Hi,
I'm after some advise. I currently have an one account offset mortgage and I’m thinking about buying a flat as an investment.
Been looking at buy to let mortgages (2 year fixed). all of these mortgages seem to be over 4% and over 2k in fee's!!
if I added this to my current mortgage I have no fee's and a lower interest.
would I get taxed on the full rental income if I did it this way?
Help...

Gian wrote: »

thanks
yes i sufficient equity and if i do pay for the flat out of my current mortage the interest rate will still stay at 3.65

No problem...now being taxed is the hard part. You will draw down an amount equal to 100% of the house purchase price and an extra sum for fees and charges. Now the interest on that is tax deductible against the rental income....but...as you pay off the mortgage the payments you make will pay off the capital of the investment and you will deduct less and less each year and pay more tax. You cannot re borrow back the overpayments. So my suggestion is to start treating it like a normal every day mortgage and have your income and the rental income credited to another bank/savings account and only transfer an amount each week/month that will cover just the interest. i.e if you borrow £100,000 then only repay £70 per week. That's all you'll need to pay to cover the interest. If you deposited £100 per week then the outstanding loan that you can deduct the interest against will reduce by £30 per week...and that compounds every week.