Mortgage advice, two properties.

Nystagmos

We have a 1 bed flat currently valued around £65K, owned outright, which is now in the process of being rented out, we expect to get around £375/mth after management fees.

We would like to purchase a house, valued somewhere around £200K.

Joint income is £50K and we have £20K savings.

I understand if the Let property is mortgaged, the interest payments on the mortgage can be offset against the income tax - is that correct?

So we are thinking of getting a ~ 75% LTV buy-to-let mortgage on the Flat to make ~ £45K available, then use this with the 20K as a deposit on a £200K house - so that this mortgage LTV is lower with a better rate and the rental income tax bill will be significanlty reduced.

We will need to do some calculations to take into account set up fees, BTL rates etc, but does this seem like the best approach?

Other than a single 90% LTV mortgage on the house, are there any other alternatives? Do any mortgage companies secure a loan on two properties? - i.e. could we use the equity in the flat as a deposit without having to get a separate mortgage?

Any feedback / suggestions appreciated.

kingstreet

The remortgage to fund deposit idea is a good one.

I can't think of a cross-charging lender at the moment, although one or two smaller building societies used to do it. The One Account is reputed to do it, but I have no evidence to back that.

kidmugsy

You could compare with the alternative of selling the flat and buying the house with an LTV of 60%, which might further reduce the interest rate.