PLEASE READ BEFORE POSTING

Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.

We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

BTL - use cash or get a mortgage

MGAstra
MGAstra Posts: 65 Forumite
in House buying, renting & selling
Hi,

I'm considering buying a property with a view of carrying out rennovation work then either selling it or letting it.

The house is selling for 40K, I need to spend 5K on it, then it will be worth ~65K (in ~5months time). If I sell it I will need to pay some CGT but I might let it out for £350/pcm (I dont really want to make the decision just yet if possible)

So, I'm not sure what to do, I have cash I could use to buy it but then if I let it out I gues I would need to pay income tax on the £350/pcm. If I get a BTL mortgage, I could keep my cash in the ISA accounts and the interest on the mortgage will be tax exempt.

Please could anyone offer some advice or comment to help me make a decision!! Many thanks :)

Comments

  • googler
    googler Posts: 16,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    It will be VERY difficult to sell within 6 mths of buying, because one of the things that lenders are very twitchy about at the moment is lending on properties that have been with the current owner for less than this period.

    You may well be able to buy it, but there's no guarantee that anyone else will be able to do so after you having it for 4 or 5 mths.
  • anselld
    anselld Posts: 8,428 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    You are unlikely to get a BTL mortgage at an interest rate lower than your ISA rate. Unless you can achieve this it is cheaper to use cash.

    Secondly, Buying refurbishing and selling properties is classed as property development rather than investment and is hence taxed under income tax rather than CGT.
  • seven-day-weekend
    seven-day-weekend Posts: 36,755 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Puzzled: Why does it matter if you sell before you have owned the property for six months??
    (AKA HRH_MUngo)
    Member #10 of £2 savers club
    Imagine someone holding forth on biology whose only knowledge of the subject is the Book of British Birds, and you have a rough idea of what it feels like to read Richard Dawkins on theology: Terry Eagleton
  • anselld
    anselld Posts: 8,428 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    seven-day-weekend wrote: »
    Puzzled: Why does it matter if you sell before you have owned the property for six months??

    It raises suspicion of money laundering unless you are a recognised developer.
  • seven-day-weekend
    seven-day-weekend Posts: 36,755 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Ok right, thanks for answering. Surely you would have a paper trail though to show where the money had come from?

    Oh well, off-topic, thanks for explaining. :)
    (AKA HRH_MUngo)
    Member #10 of £2 savers club
    Imagine someone holding forth on biology whose only knowledge of the subject is the Book of British Birds, and you have a rough idea of what it feels like to read Richard Dawkins on theology: Terry Eagleton
  • kingstreet
    kingstreet Posts: 39,023 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    BTL lenders want property which is readily-lettable. They won't often lend on refurbishments.

    At £40k, you'll find the property falls below the minimum value of many BTL specialists too.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • MGAstra
    MGAstra Posts: 65 Forumite
    WOW! Thank you to everyone that has replied, this is really good information!

    I will do some more digging and report back here...
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 347K Banking & Borrowing
  • 251.5K Reduce Debt & Boost Income
  • 451.7K Spending & Discounts
  • 239.3K Work, Benefits & Business
  • 615.1K Mortgages, Homes & Bills
  • 175K Life & Family
  • 252.6K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.
Update Your Picture