Novice needing Mortgage Help

Steve3L

Hi all,

I am quite young and a complete novice to all things financial.

I inherited a house a little while back when my mum passed away which I am now renting out. I luckily have no mortgage on it and it is worth around £200K.
After management fees Im earning about £810 a month for it.

I have just recently got married and my wife an I are now looking to buy a house (renting at the moment). We both work with good incomes earning about 70-75K a year between us. I have enough in savings to put down a good deposit.

Would it be cheaper to sell the property (hoping to get around 200K) and simply try to buy a new house with the money.
Or does it make sense to continue to rent it out and get a mortgage on a new place, using the income from my property to pay for it?

ANy help/advice would be hugely appreciated

Steve

Meeper

Would it be cheaper to sell the property (hoping to get around 200K) and simply try to buy a new house with the money.

Cheaper than what?

does it make sense to continue to rent it out and get a mortgage on a new place, using the income from my property to pay for it?

Hopefully you are declaring the rental income to HMRC via an annual tax return and you are putting a proportion of it aside to pay the tax man at the end of the year....

Anyhow, if purchasing a new property to live in, I would look to having a deposit of around 40% of the purchase price, to get the absolute best deal available. If you have that in savings, all good. Get a mortgage on the new place and away you go. If you don't have that much, get a small mortgage on the rental property to take you up to that level, then proceed as above.

Remember that you can offset the mortgage interest against the rental income, so you can reduce your tax liability that way also, subject to certain limits.

Wh05apk

Meeper wrote: »

Cheaper than what?
Hopefully you are declaring the rental income to HMRC via an annual tax return and you are putting a proportion of it aside to pay the tax man at the end of the year....

Anyhow, if purchasing a new property to live in, I would look to having a deposit of around 40% of the purchase price, to get the absolute best deal available. If you have that in savings, all good. Get a mortgage on the new place and away you go. If you don't have that much, get a small mortgage on the rental property to take you up to that level, then proceed as above.

Remember that you can offset the mortgage interest against the rental income, so you can reduce your tax liability that way also, subject to certain limits.

This is where it gets interesting!

I would disagree with the percentage above, decent rates are available at 75% LTV, borrowing against the rental property will be far more expensive.

With regards to claiming mortgage interest, you should in theory be able to claim interest on a mortgage upto £200k (if that was the property value when you started renting out) regardless of which property the mortgage is secured on.