Re-mortgaging for extension query

Peeweeontour

A bit of a rambling query here so please bear with me.

We own our house with a smallish mortgage (60k – house is worth around 240k)

We are having to move temporarily for work and so will be renting our house out, and renting another (for roughly 2 years). We were planning on extending in the future, but are now thinking as we need to move out now, we may as well extend while we aren’t there. So the plan is to rent the house for around 18 months and then extend before moving back in.

Our current mortgage rate is 2.5% (SVR).

In order to extend we will need to re-mortgage – will probably need to borrow another 70k. I am considering re-mortgaging now rather than waiting until we need the money in 18 months. I have found a 5 year fix for 3.29%. Reasons for this is that it will reduce the tax liability on the income from renting our house (from around £1600 to £600 based on my rough calculations as my interest payments are higher), Plus I can put the 70k in a savings account to earn some interest on it and I am taking advantage of the current low-ish fixed rate deals (I am assuming that rates will be higher in 18 months)

Just wondered if there was anything glaringly obvious I have missed with the my ideas regarding re-mortgaging sooner rather than later above?

Thanks in advance!

GwylimT

Remember if you want that mortgage you also need consent to let, some lenders don't offer great deals alongside consent to let.

dimbo61

What would happen if the NEW lender said "NO we will not grant you consent to let"
You have a Huge mortgage and still need to rent somewhere else.
Why not rent out as it is after asking for Consent to Let and when you move back to the area and the tenants have moved out then get the work done.
Build up savings to help pay for the work

Annisele

Peeweeontour wrote: »

In order to extend we will need to re-mortgage – will probably need to borrow another 70k. I am considering re-mortgaging now rather than waiting until we need the money in 18 months. I have found a 5 year fix for 3.29%. Reasons for this is that it will reduce the tax liability on the income from renting our house (from around £1600 to £600 based on my rough calculations as my interest payments are higher), Plus I can put the 70k in a savings account to earn some interest on it and I am taking advantage of the current low-ish fixed rate deals (I am assuming that rates will be higher in 18 months)

I'm not sure if you could claim tax relief on the entire interest payments if you did that. (NB - by "not sure" I mean exactly that; you should check with somebody who knows what they're talking about).

You can certainly offset the interest paid on the loan you used to buy the property against tax. Whether you can also offset the interest cost of a recent further advance is another thing.

As others have said, you may also have a problem with consent to let. If you borrow more from a new lender, then immediately ask for CTL, they'll suspect that you were always planning to let the property and they'll probably say no. A new lender would almost certainly mean a BTL loan.

Even if you stay with your existing lender, it looks odd to borrow money to extend and then immediately ask for CTL. Your lender may well want to know what happened to the money it lent you to extend the property...

Edit: plus, it's almost a rule on these boards that any thread started by a prospective new landlord should include a link to G_M's mammoth post on the subject.

Peeweeontour

Thanks for the replies everyone - yes I hadn't considered requiring consent to let. Our current mortgage is with C&G and we are on their SVR. The 5 year fix mortgage I was looking at was with HSBC.

If we stayed with C&G I wouldn't have been looking to borrow anymore anyway, the point of staying would be to keep the 2.5% rate (which I would only keep if not borrowing more)

After doing a bit of investigation on these it looks like C&G have tightened up their consent to let criteria and would probably try and bung us off their SVR to a higher rate anyway. HSBC allow you to apply for consent to let (for a temporary period) after 6 months so looks like we will be best applying for the remortgage with them now and then look to move in 6 months. My husbands work are fairly flexible around when he can move so this could work.

And Annisele just checked and I think you are right..I had not realised its only the interest on the mortgage to buy the house that you can claim relief on! This is rather annoying....I guess I should not have spent the past 7 years overpaying my mortgage!

So the only benefit I can see of remortgaging now rather than later then is to take advantage of the low interest rates, and bung the money in an account to earn a bit of interest.