Second Home

KIMMYG_2

Hope someone can help??

We currently have a mortgage on our flat of £45k (flat valued at 65k) and would like to now rent our flat out and buy another house. We have around £13k savings for a deposit but can anyone tell me if its as easy as putting down a deposit on a second property or would I need to change my flat to a buy to let?

Please can someone get in touch asap?:(

holly_hobby

You will need to seek your current lenders consent to let (and if they refuse then seek a BTl remortgage). (once let and the mortgage is completely serviced by the rent, this commitment will usually be set aside by your new lender, when considering your affordability for your new main residence aka as under a Let To Buy mortgage arrangement).

You payrate will increase under CTL - and is a reviewable arrangement with the lender, usually 3 yrs is when they want you to change to a BTL if the property is still let.

You will need to consider lots of other things apart from this:-
what is the achieveable rent

- whom are your target tenants/market
- is the achieveable rent sufficient to meet the mortgage with a surplus (work of 125% for a general idea)
- contingency funds for emergeny repairs and for paying the mortgage in times when you have not tentants in situ
- landlords insurance
- are you to manage the let yourself (if permitted by the lender), or will you seek the services of an ARLA letting agent ? If so, you need to factor in their costs too.

TAX
You should advise HMRC within 2 yrs of your change of primary residence for CGT purposes (or they will make the nomination for you).

However if you sell your flat within 3 yrs of vacating it, there will be no CGT calculation reqd or liability.

Sale after this period just means that there will be a calcualtion performed an any gain realised on disposal, but this will be offset by various allowances and reliefs, such a PRR, Lettings allowance (max 40k), annual CGT allowance and any losses.

The list goes on, but the above are the basics ... so first things first if you are still interested in letting is to speak to your current lender re CTL, and if you need any more guidance just come back.

Actually there is a great sticky on the board re BTL and all the pros and cons, its comprehensive and very informative for the layman.

Hope this helps ... good luck !

Holly