Buy to let or not

Bambi63

I want to buy a bigger house, I have a basic mortgage arranged, the sale of my own house fell through.
I want to rent my house out now, do I apply for a buy to let mortgage, or carry on with the basic mortgage?
I don't need to rely on the rent from my property to pay the mortgage.
Just thinking for tax purposes. ie to write of the mortgage against any income from the old house.
Does the mortgage need to be against my old house?
Cheers
Kim

Thrugelmir

Approach your current lender as ascertain what options you have with regards to letting the property. As lenders do differ.

Any interest paid on the mortgage can be offset against the rental income from the property. However the capital element isn't.

Your new mortgage is a totally separate issue from a tax point of view.

_Andy_

Ask your lender for 'consent to let' - ie retaining residential rates.

GMS

Ensure that the lender for the new property is happy for you to have a rented property in the background.

What loan to value are you applying for on the new property? Where will the deposit come from?

Value of current property? Mortgage outstanding? Monthly rental income? Your salary?

holly_hobby

Easiest hassel free solution (if you don't need or want to release any equity from your "old" house), is to seek consent to let from your current mge lender.

Generally you will have a svr loading of circa 1% (as upon let is essentially become commercial lending), its timebound at around the 3 yr mark, and they may also charge an admin fee.

If they refuse, or you want to release equity (max ltv 75%), and/or you don't like the look of the rate on offer, you could seek out a buy to let mortgage (given that several lenders are intermediary access only, I would engage a broker to assist). BTL criteria is that the rental income should be no less than 125% of the mge interest *(use 6% as a ballpark calc figure), whilst some lenders also have a min earned income requirement.

Tax wise, and in this situation, you may offset the interest element of the mge associated to your let property against the rental income. (nb - in respect of any future equity release, this is capped at a mge amount equal to the value of the property when it entered the business, so just be mindful of this later down the line).

Also keep a record of any costs (ie legal, lender, etc) associated with changing the property into a let residence, as these too are tax deductable, as are various other expenses associated with the business.

Above are the very basics .... please ensure that you enter this with your eyes wide open, letting can be a very rewarding enterprise, but can also be a living nightmare when it goes wrong - so do your homework before you jump in.

Hope this helps

Holly