Advice on Mortgage BTL or Residential

blinkey123

I am self employed looking to buy a 3/4 bed property and take one room myself and rent out the other 2/3.
The maximum I can borrow is £130,000(5x income from SA302) on a residential mortgage and I have up to £50,000 deposit available.
The properties I am looking at are in the region of £165k-£180k.

My questions are...
1) bearing in mind that I will be taking a room in the property should it be purchased with a residential mortgage(assuming they grant me permission to rent out rooms) or BTL mortgage?

2) Is the interest element of a residential mortgage classed as an expense for my tax returns?

3) Will rent from the property be classed as income on my SA302 in future years regardless of mortgage type, therefore increasing my profit and allowing me to borrow more in the future.

I can't decide which is best to do as I have had no experience of this sort of stuff in the past...

Thanks in advance

Blinkey

kingstreet

It's residential. It's a BTL only if you let the whole property on an AST basis.

No. Interest on a residential mortgage is not classed as an expense for tax purposes. However, you may be able to take advantage of the "Rent A Room" scheme, allowing you to earn a certain amount from a lodger tax-free.

AFAIK any income you receive which is assessable to tax and included in your SA302 can be used for mortgage purposes later. Check with HMRC where it appears on the SA302, to ensure it appears in the top couple of boxes which lenders accept.

blinkey123

That's great. Thanks for your help.

Blinkey