Buying another house - Which one to mortgage?

stumblingtrout

Good Evening,

The other half and I are looking to move at some point in the next few months, ideally to a larger property more suitable for when we start a family.

We currently live in a 3 bedroom (well, 2 and a study) semi-detached house in quite a desirable village. We bought for £180k in 2012, and with some improvements we have made I would imagine it's worth £200k.

We are fortunate enough to have no mortgage on this house.

We are looking to move to a detached house in a more rural location (i.e. more bang for your buck out in the a**e end of nowhere)

Looking on Right-move, we could get a 3 bed detached property with a bit more space for £185k.

We have combined savings of approx. £50k that we could either use as a deposit or to renovate/improve new property.

In my mind, we have 3 options

1) Straight up sell & move
2) Mortgage our current house & buy the new one cash then let current house for circa £800pcm
3) Mortgage new house & let current house leaving it mortgage free

I think we would discount option 1 as this is a pretty decent property investment opportunity, so I'm looking for advice on options 2 and 3.

Am I right in thinking that we wouldn't pay income tax on the mortgage interest payments for the mortgage if we went for option 2?

Would this mean that more tax would be due on option 3?

Assume that With option 2, it would be a BTL mortgage we required, any good deals out there? We are both 27 years old and between us earn £53k a year so should be able to get a mortgage without too much hassle?

Thanks

GMS

Putting a mortgage on the property you are letting would enable you to offset the mortgage interest against the rental income for tax purposes.

As you are intending to let the property you would need a Buy to Let mortgage. Many BTL mortgages are broker only so a chat with one could be useful.

stumblingtrout

GMS - Many thanks for your post. That definitely makes sense then as Option 3 would cost more in tax.

I will book an appointment with a mortgage adviser then and see what they say.

GMS

Don't get blinded by the interest rate on a BTL. Often the lower rates have big arrangement fees. Make sure there is a balance between the rate and fees.

Broker should guide you.

Good luck