Buy to Lets x 2 (Does it mean double the costs)?

G_M

barneybeagle wrote: »

We are moving house
The house we are moving out of we intend to rent (it is nearly paid off).
Do you have CTL?
I own another property outright which I currently rent out.
To raise capital to purchase the house we are moving into then as well as the deposit
What deposit?
I've been told I can take money out of each of my other two properties
You could certainly raise capital out of the equity in these properties As they are both let, you would need BTLmortgages (or in case of property 1 - CTL)
and these will become buy to lets
and the house we are moving into will hopefully be paid off.

The other option I've been told about is to get a residential mortgage on the house we are moving out of
This already has a mortgage. as asked above, if this is a residential mortgage, have got/are you getting CTL?
which we intend to rent out. Now I believe this is a 'grey' area?
'Grey' in what way? If you let the property you must comply with mortgage conditions is BTL or CTL.
Black & white.
I want to use the interest part of any mortgage to offset my tax return at the end of the year, but have been told if it is a residential mortgage I cannot do this.
No.
However, I know of people that do and they don't appear to think this is not right. Is their some kind of issue with Underwriters etc?

Hope this info makes things a little clearer?

Thanks in advance
bb

The point about offsetting borrowing against tax is not to do with the type of loan, it is to do with the purpose.

If you borrow in order to buy your new home then that cash is not funding your letting business, so cannot be used to offset tax from letting.

Whether you have raised the cash from a mortgage on the residential home, or from one of your let properties makes no difference - the cash is not being used to buy the property you are leting.

holly_hobby

barneybeagle wrote: »

We are moving house
The house we are moving out of we intend to rent (it is nearly paid off).
I own another property outright which I currently rent out.
To raise capital to purchase the house we are moving into then as well as the deposit I've been told I can take money out of each of my other two properties and these will become buy to lets and the house we are moving into will hopefully be paid off

Yes this is the most tax efficient method to pch your own residence.

The equity released will be via a BTL remortgage, with the mge interest a permitted deduction by HMRC, as it is classed as business capital withdrawal. And is considered by HMRC as you withdrawing your original capital investment into business (which in this case is equal to the value of the propety when it entered let).

Therefore (the interest) is a deductable debt of the business, and remains so regardless of what the released capital is used for e.g it does not have to either directly pch another property for let, or be re-invested into the business in any format.

Be wary though, permitted interest duduction is capped at a mge equal in value to the property when it entered commercial let (either the value when it stopped being your main residence, or the pch price, if it was bought and immediately let). You can of course still release equity above this figure (facilitated by market value increase and available LTV from lenders), its just that any loan interest relating to borrowings in excess of the original value when it became part of the business, is NO longer a permitted deduction (so will have a direct impact on your net yield).

barneybeagle wrote: »

The other option I've been told about is to get a residential mortgage on the house we are moving out of which we intend to rent out. Now I believe this is a 'grey' area? I want to use the interest part of any mortgage to offset my tax return at the end of the year, but have been told if it is a residential mortgage I cannot do this. However, I know of people that do and they don't appear to think this is not right. Is their some kind of issue with Underwriters etc?

If you seek a residential mge with the intention to let, its essentially a fraudulent mge application.

If your property is under a resi mge, and you let without the lenders consent, you are in breach of your mge contractual t&cs. Another no no.

Of course, you could whilst you still live in your home, seek a residential remortgage or a further advance with your current lender - and then seek consent to let - which if within 6 mths will probably be rejected by the lender (given the impression that you have ussed this as a back door BTL eq release exercise) - but if they do say no, you're back to having to seek a BTL remortgage to enable it to be let.

Hope this helps

Holly x

barneybeagle

Hello Geofky,

My apologies, I mis read your post. Thanks for the information. I'll read through and digest the posts later. Sorry to appear thick, but what is CTL?

Regards
bb

holly_hobby

Consent to Let = permission from the mge lender, for an individual with a residential mge to let the property to 3rd parties.

It is generally time bound (circa 3 yrs), and the request may be refused by the lender, forcing the individual to seek a specific BTL product if they still wish to let the dwelling.

Hope this helps

Holly

Hillbilly1

G_M wrote: »

M_K

All of your posts tout for business.

reported.

I hope they are better at maths than spelling!

G_M

AlexMac wrote: »

I see now that you want to maximise the tax by offsetting as much mortgage interest as poss against income.

:rotfl: :rotfl:

barneybeagle

Thanks for all the advice:

To confirm I know I have no problem raising the capital from my current rental property and also from the property we are in at present in which we aim to rent out. That added to the deposit would pay off the house we aim to move into.

My main question appears to have been answered by several of you regarding a Residential mortgage on the property we are moving out of option. This according to your posts cannot be done unless the mortgage lender approves in which they won't do (is this correct) as they will insist on a Buy to Let mortgage.

So people that have residential mortgages and who rent them out from day 1 are breaking the law? If they have not informed the mortgage provider then is this correct.

As I say I just want to go down the right route and I'm well aware people will get away with this, but knowing my look I wouldn't so I do not want the worry!

My current mortgage in the property we are living in is very little and I can pay it off now if I wished, but it would cost £250 to do this. The mortgage is with NRAM (Fallout of Northern Rock) so as I understand they have just taken on the debt and would not offer me another mortgage so I would have to look elsewhere anyway. One person I spoke to said it may be better to hold on and pay off the mortgage yet? Not too sure where she was coming from?

Can I also claim back any Solicitors/Estate Agents fees, etc used on a buy to let house through my tax?

A final question, how do I go about thanking people on this forum that provide their time and advice. There's a lot of kind thoughtful people out there...cheers
bb

Thrugelmir

barneybeagle wrote: »

I'm well aware people will get away with this,

The longer the property is let without permission the greater the risk. Tenants themselves are most likely to trigger an enquiry from the lender.

BitterAndTwisted

"So people that have residential mortgages and who rent them out from day 1 are breaking the law? If they have not informed the mortgage provider then, is this correct?"


No laws broken, it's purely a contractual matter and therefore civil not criminal. But they would be in breach of the terms of the loan. Which could precipitate the lander calling up the loan and demanding immediate payment, and for the borrower's insurance to be void. Not something I would be willing to risk.

Also note, that there is a great deal of information-exchange between banks, electoral register, insurance companies and the like. Anyone with a residential mortgage going into a commercial let is likely to be discovered ere long.

holly_hobby

barneybeagle wrote: »

My main question appears to have been answered by several of you regarding a Residential mortgage on the property we are moving out of option. This according to your posts cannot be done unless the mortgage lender approves in which they won't do (is this correct) as they will insist on a Buy to Let mortgage.

As you are both releasing equity and to let the property - yes you would need to source a BTL remortgage in both cases.

If you were not releasing equity, then on the property you currently reside in, you could have sought consent to let - which is essentially seeking the lenders permission in allowing you to rent the property, whilst its still technically under a resi agreement with them. As prev stated CTL is usually timebound at circa 3 yrs (ie it is not designed for the longterm, but more a short term solution for accidential landlords)

barneybeagle wrote: »

So people that have residential mortgages and who rent them out from day 1 are breaking the law? If they have not informed the mortgage provider then is this correct.

If they rent at any time during the mortgaged period, without the lenders agreement, they are in breach of their mortgage t&cs - regardless.

barneybeagle wrote: »

As I say I just want to go down the right route and I'm well aware people will get away with this, but knowing my look I wouldn't so I do not want the worry!

Yes - its pretty easily rumbled by a simple votors roll (and other) checks - which the lender may peform at any time.

barneybeagle wrote: »

My current mortgage in the property we are living in is very little and I can pay it off now if I wished, but it would cost £250 to do this. The mortgage is with NRAM (Fallout of Northern Rock) so as I understand they have just taken on the debt and would not offer me another mortgage so I would have to look elsewhere anyway.

Yep, given that you also want to release equity from the property, a BTL remortgage is the only route in any event.

barneybeagle wrote: »

One person I spoke to said it may be better to hold on and pay off the mortgage yet? Not too sure where she was coming from?

Pay off the mge on the let (or to be let) property ? No benefit from a tax point of view. Also unencumbered (mge free) properties don't qualify for fee free remortgage deals, and can be restrictive with some lenders when releasing equity.

barneybeagle wrote: »

Can I also claim back any Solicitors/Estate Agents fees, etc used on a buy to let house through my tax?

Deductable acquistion/re-strcuture of finance ie costs associated with remortgaging to release equity/disposal fees, must be directly associated and incurred by the business - as long as there is an audit trail between the 2 events, then yes they are permitted deductions.

If you mean could you claim back your legal expenses etc when you initially purchased the current property you live in, then no. This is because the fees were not incurred in relation to the business at the time.

In that the associated fees were not incurred in purchasing a business asset (ie in this case a property to let), but were instead in relation to the pch of the property for it to become your own private residence (albeit it is now later to become/be amalgamated into the business).

Hope that makes sense ?

barneybeagle wrote: »

A final question, how do I go about thanking people on this forum that provide their time and advice. There's a lot of kind thoughtful people out there...cheers
bb

Click their "thanks" button

Hope this helps

Holly