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OK - how do I do it then?

edited 30 November -1 at 1:00AM in House Buying, Renting & Selling
2 replies 1.2K views
LuisLuis Forumite
637 posts
edited 30 November -1 at 1:00AM in House Buying, Renting & Selling
I have a vague notion of getting a second property to rent out and have as an asset for the future. I have rented property out in the past, but that was in a 'we both had a house' situation.

I have a vague plan A and a vague plan B.

A - I have a 3 bed terrace. Thinking of buying with OH and putting this one on a BTL. How do I do this?

B - staying where we are, raising funds against the equity of this house (as fixed term ends this sept will be needing to remortgage anyway), and using this to buy a small flat or similar to rent out - how do I do this?

So please, advice on how to do either of these plans, and opinions as to which one (if either?). All help gratefully received :D
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Replies

  • With plan A, I would imagine it would be a simple case of having a mortgage for the new property...if your existing property is mortage free then I can't see any problems. However if you have a mortgage on the property then you would have to either get agreement from your existing mortgage lender for you to rent out the property or re-mortgage it on a buy to let mortgage.

    With plan b it would be a simple case of remortgaging your property and using the funds to buy the rental property mortgage.

    A good financial advisor would be able to advise you further.
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  • dougk_2dougk_2 Forumite
    1.4K posts
    a) and b) require a similar situation !

    You will need one BTL mortgage and one normal mortgage (unless you have the funds to purchase one outright).

    Case a) would require you to either get your lenders permission to rent or remortgage on a BTL and you may want to tap into the equity to fund your new house. The interest payments on the rented property can be ofset against the tax you pay on the rent so sometimes it makes sense to borrow as much as you can against this property.
    The amount of the mortgage the company will lend will depend on the potential rental income (most require 130% of the interest to be paid by rental income). You would then get a standard mortgage for the new property although the lenders may take into account the BTL mortgage and rental income.

    Case b) is the same for case a) except the mortgages would be the other way round!

    Option a) will have tax advantages as you have lived in the property so you will have exemption from CGT for 3+ years. (see previous threads on this)
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