Possible/Best way to buy this house?

costingbunny_2

Seen a house at £300,000 which needs at least £25,000 spending on it. There is massive interest so will sell at the asking price and will therefore attract the 3% stamp duty.
How would you use your finances/mortgage to buy it? Have £220,000 in savings and a property with £125,000 equity in it which can be rented or sold. Would you use all your savings plus a mortgage (leaving the property monies) or would you use some of the savings and get a mortgage? I know it's not a bad position to be in but it is a massive step so just looking for opinions.
Cheers

arbrighton

Personally I'd avoid getting a mortgage if possible.
Why does it need £25k spending? OR is it 'a bit outdated, not to my taste, I'd like to ....'?

OddballJamie

I'd mortgage the cheaper house for £100k, then rent it out to cover the mortgage re-payments. Then you have your new house mortgage free and the income tax will be less on the rent of your old house due to the interest on the mortgage.

martinsurrey

OddballJamie wrote: »

I'd mortgage the cheaper house for £100k, then rent it out to cover the mortgage re-payments. Then you have your new house mortgage free and the income tax will be less on the rent of your old house due to the interest on the mortgage.

OP said it’s a house with £125k equity in it, not that it’s a £125k mortgage free house.

Also you might not be able to extract that much equity from the rental house and still be 100% tax deductable.

Without a lot more info we can’t give good advice.

On the current house can we have the following info.

1) When was it bought and for how much
2) What is the history with its occupation, did you ever live there, if so between which dates. When was it first rented out (if ever).
3) what is its current market value (realistic sales price NOT EA value)

getmore4less

If the house is going to sell quick

I would probably go down the largest offset mortgage on the new house and offset any surplus cash.

This elimates any timing on the current property letting/selling and leaves cash to do it up.

If done right you will be able to offset the(some/all) interest on the mortgage against any letting income.


Even if you end up not needing a mortgage the offset will be free to run and instant access to funds for cash flow in the future. probably worth the cost of setting it up.

costingbunny_2

Hi
Current house is mortgage free (we live in it) and been for sale for £140,000 for a year with no offers. I put the value down at £125,000 as being the bottom offer we would take.
New house needs money for new windows (large bay windows) as current ones are wooden and rotting, Other possible spends on roof and maybe some electrics.
Other monies are less immediate as we can live in the house as it is - knocking down a wall, re-decorating, new kitchen/bathroom, new flooring and curtains etc.

costingbunny_2

To add, I 'only' need to find the house monies £300,000 as I am happy to save up further for the house repairs/improvements - I would not want to borrow monies (under a mortgage) for the repairs/improvements. I would rather save up or use savings (if we have any left).

martinsurrey

costingbunny wrote: »

To add, I 'only' need to find the house monies £300,000 as I am happy to save up further for the house repairs/improvements - I would not want to borrow monies (under a mortgage) for the repairs/improvements. I would rather save up or use savings (if we have any left).

I agree with getmore4less.

get as big an offset as possible, at the best rate, and then stick all your savings against it.

If you then sell your current house you can be in effect mortgage free, but with the flexability to dip into it as work is done on the new house.

(if you subsequently rent the old house out, get a cheap (on fees)BTL mortgage and put the funds released against the ofset to make it 100% offset, the BTL interest would be tax deductable, while the offset interest isnt)

getmore4less

martinsurrey wrote: »

, the BTL interest would be tax deductable, while the offset interest isnt)

It should be possible to get the debt on the new house eligible for tax relief.

The Debt does not have to be secured on the let property.