Mortgage Advice

Coops1221

Hello,
We are currently trying to buy a new property and I wondered if you could help with a few questions / critique the plan.
(for ease of reading ill round all figures up.)

We have a house currently which is worth 120,000. We currently have a 50,000 mortgage outstanding on the property.
We have seen a new house that we are thinking about putting an offer in for but we would like to keep our current house and rent it out. The new house would be approx. 170,000. We currently have around 30,000 to use a deposit. Collectively we earn 4500 a month gross and would estimate a 450 per month rental income. We do not have loans and the only ‘required’ monthly payment – excluding Mortgage, CTax is 167 for a lease car.

What are the things to look out for when changing our mortgage to buy to let?
What other costs do I need to factor in? e.g. insurance
Would I get taxed on the income I would ‘make’ on the rental property?
Could I increase the buy to let mortgage amount and use that for improvements etc? how would this effect tax as the ‘profit’ I would make would be reduced.

Thanks for any advice!

Michael

ACG

With regards to the BTL mortgage, i would suggest speaking to a broker. The majority of BTL deals are only available through brokers. As for what you should watch out for it really does depend on what you want from your mortgage and a broker will go through this with you.

For the residential mortgage, double check what the new lender states with regards to properties in the background. Some will only allow the new residential property to go upto a certain LTV - co-op for example would not allow your new residential property to be aboue 75% LTV.

Also check what their stance is with regards to payments... a lot (and this goes for the BTL mortgage too) will want to see the rent is 125% of the monthly repayments on the mortgage (typically this is done on an interest only at 6%... so assume your mortgage payments were £400 a month, the rent would need to be £500).

As for the tax side, speak to an accountant - they may be able to find some ways to offset the tax etc.