Buying 2nd property to rent out - mortgage free on current house

Kiwikind

Hi folks

Quick question. My girlfriend and I am in the fortunate position of owning our first and only property due to paying cash for it (nice little lottery win!) and therefore have quite a bit left lying around from what was going to be the deposit on the mortgage we ended up not needing. We have been in our home 18 months and have considered buying another flat and renting it out.

Based on our deposit and current tracker rates, the rent alone would cover the mortgage, and that isn't even counting the £1,500 per month we can easily afford between us as additional payments. But I have read that we would need a BTL mortgage and that trying to cheat with a residential mortgage with a far better rate is a no no. I dont understand why this has to be this way when the rent alone would dwarf the monthly payment, we are capable of paying double the monthly payment between us as additional payments, and we are completely debt free elsewhere. Or put another way, even if we didn't rent it out and just it sit there, we can easily pay the mortgage off ourselves. I haven't crunched the numbers but it would almost be a better investment to buy it on a low rate residential and NOT rent it out, rather than pay absurd rates and fees for a mortgage that barely covers the rent I would get in.

I will keep reading but as a complete novice here, if any experts can give even a topline view or understanding that would be great. Perhaps I have overlooked a key point around the fact that in our situation we are not dependent on the rent to pay it off, unlike many people. Thanks.

GMS

If you are intending to let the property the it becomes a business venture with rates in keeping.


You may be able to raise funds against your residential property meaning residential rates. You could then use the funds to buy the rental property. Your deposit you had saved may be enough to cover the difference?


Seek advice from an accountant on this though to ensure you can offset the interest against your tax due from rental.


Broker is the best way for a Buy to Let.


Letting without permission on a residential mortgage is a breach of T&C's and could result in the mortgage being called in and/or you appearing on the naughty list and struggling to get finance in the future.

dimbo61

Say you paid £250K cash for your home 6 months ago.
You see a nice two bed, two bathroom flat in a good area that will rent easily for £700/800 a month ( £150K ) purchase price.
Speak to a broker and get a residential mortgage on your home for £150K or 60% LTV.
Buy the flat with cash and rent out.
Consider an offset mortgage.

Thrugelmir

If you believe property to be a good investment. Rather than an empty property. Buy a bigger residential property. No tax to pay either.

dimbo61

I agree with Thrugelmir that buying a better property which you can enjoy and use beats worrying about a rental property any day

Kiwikind

Ok thanks guys, I will continue reading about it as I said, and consider your suggestions. Will report back as and when!