Mortgage on buy to let or pay cash?

applecharlotte

I'm not sure whether i need the advice of an accountant or a financial advisor so hopefully somebody here can help. I have had an offer accepter on a buy to let property of 55k. My mortgage on my home is 46k. I plan to take the buy to let mortgage over 15 years, borrowng 41k. Bearing in mind the survey costs and mortgage arrangement fees would it be cheaper to paycash for the buy to let but therefore pay more tax on the income, or pay my own mortgage off, pay less tax on the rental incme ( which off course will increase year on year anyway as the capital is repaid and the interest gets less. Any help would be appreciated even if its just to point me in the direction of who can help. Suspect an accountant would be the person to ask.

Thrugelmir

A crude measure is to compare the interest rates on the 2 mortgages. Making allowance for the fact the interest on the BTL is tax deductible.

applecharlotte

My brain is working overtime here. I think i've come to the conclusion that it would be just as beneficial to pay more tax and buy the place, what with the fees and everything. Something just occurred to me. Could i write the purchase price off against the tax in the first year as it would have cost me 55000 just to make the 5000 rental?

Thrugelmir

Capital expenditure is not deductible against rental income. With regards to the tax position. Suggest you post a question on the tax board or seek professional advice. As tax plays an important part as to whether owning a BTL is worthwhile when compared to other ways of using/investing the money. So you need to understand matters fully before leaping in.

BTL is a business. So there's considerable risk. Nor just a question of receiving a rent cheque every month.

bigadaj

Also OP remember that just because you don't have a mortgage this doesn't necessarily.ly mean that some form of survey wouldn't be wise.

Is the purchase property a flat or a house, the cost is relatively low which is good in terms of letting e co nominally but would this raise your risk in Terms of being in a bad area, being unattractive to tenants etc

kingstreet

applecharlotte wrote: »

I have had an offer accepter on a buy to let property of 55k. My mortgage on my home is 46k. I plan to take the buy to let mortgage over 15 years, borrowng 41k. Bearing in mind the survey costs and mortgage arrangement fees would it be cheaper to paycash for the buy to let but therefore pay more tax on the income, or pay my own mortgage off, pay less tax on the rental incme ( which off course will increase year on year anyway as the capital is repaid and the interest gets less. Any help would be appreciated even if its just to point me in the direction of who can help. Suspect an accountant would be the person to ask.

Do you plan to borrow the £41k on the property to be let, or on your own home? Is there enough equity in your own home, as you have omitted the value.

Survey costs and arrangement fees? For what?

Pay less tax on the rental income?

Is there any chance you can clarify your thoughts? What do you think is possible? What do you understand about the way mortgage interest is allowable as a trading expense?

I'd like to start by checking your understanding of the issues, before we go any further...