BTL/consent to lease or pay off mortgage quandary

cantthinkofaname97

could i pick people's brains on this matter?

i have a flat that i moved out of eight years or so ago and got consent to lease at the time (have a residential mortgage elsewhere).

the mortgage on the rented flat has been on the halifax's svr for the past few years and they have just been in touch to say my consent to lease has expired and i have to transfer on to either a 3-yr fix at 5.49 (with £999 fee) or an (almost) three-year 5.19 tracker with a £599 fee.

the balance on the mortgage is about 35,000 with 7 years left (it's a repayment with overpayments, property is worth at least 200k).

i am not overimpressed with what the halifax is offering so i have started shopping around for a better deal. (my outrage is another matter)

the other option is that i borrow another 35,000 and add it to my other mortgage (currently paying 2.5% svr at c&g)

obviously i wouldn't be allowed to borrow more at that rate but with the additional borrowing i could pay off the mortgaage on the flat.

that way i would have a rented flat with no mortgage, so i wouldn't be able to claim tax relief (am lower rate tax payer).

on the other hand i wouldn't have to keep paying exorbitant arrangement fees.

am i mad to think of doing that or is it actually quite a good idea? no plans to sell the rented property in the next few years.

any thoughts would be greatly appreciated

Thrugelmir

[QUOTE=cantthinkofaname97;47599351
i am not overimpressed with what the halifax is offering so i have started shopping around for a better deal. (my outrage is another matter)

[/QUOTE]

Appears you've been fortunate to have had CTL granted for 8 years.

As the product fees are tax deductible along with the interest. Perhaps better to maintain the status quo.

Additional mortgage funds from the C&G may not be that low an interest rate and will also incur product fees.

madeupname1

My understanding is that, if you choose to borrow the additional 35k on your home loan, the interest on that part of the mortgage would be tax deductible against rental income. You just need to be able to demonstrate that the additional money borrowed has gone towards the BTL business. Thats my understanding but its worth double checking with a tax adviser

dimbo61

You have a £250K mortgage and a mortgage on a flat of £35K and you are a lower rate tax payer!!!
If your existing lender will lend you the extra £35K at a good rate then take it.
How does the LTV work out on your home with the extra £35K ?

dimbo61

Have you looked at the rates offered by your existing lender ! Not cheap

cantthinkofaname97

thanks for your replies everyone. by the way dimbo61, i was a higher rate taxpayer for many years! you are right about c&g the rates for "additional borrowing" are not great although some have no product fee. swings, roundabouts?