Financing the deposit for buy to let

Bumbles101

We are feeling tempted by the buy to let idea. I've downloaded the free guide and there was a section that said you can't borrow to raise the 20-25% deposit. The things is that we have a reasonably small mortgage, about £100k, on our home which is now worth about £750k. Were we being naive in thinking we could raise the deposit by releasing some equity on our home or is this a viable option? We do have some cash savings, and could put some into the deposit, but the idea of using all of this on the deposit is making me nervous. Thanks in advance to anyone who can enlighten me.

G_M

How much is the BTL property you are considering?

why not simply increase the borrowing on your current mortgage for finance the purchase? Speak to your lender.

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Mallotum_X

Theres no legal reason why you cant, so it may be the mortgage co rules.

If so then why not use the savings and then replace them with the residential mortgage money.

Get the timing and documentation right up front and you will be able to claim against tax the interest on the proportion of the residential mortgage used for the deposit.

Bumbles101

G_M wrote: »

' How much is the BTL property you are considering? '

This is a new idea for us so it's all up for grabs at the moment, we've been doing a few sums and obviously the higher the buying price the better the returns, (although grater the risk...) we are in london so it won't be especially cheap, but saying that we are looking at an absolute upper limit of £400k and thinking about 3-4 bed victorian flat in an up and coming area.

Mallotum_X

Bumbles101 wrote: »

G_M wrote: »

' How much is the BTL property you are considering? '

This is a new idea for us so it's all up for grabs at the moment, we've been doing a few sums and obviously the higher the buying price the better the returns, (although grater the risk...) we are in london so it won't be especially cheap, but saying that we are looking at an absolute upper limit of £400k and thinking about 3-4 bed victorian flat in an up and coming area.

In your position I would look at borrowing the whole lot on your current house, and then having the BTL mortgage free. You should have access to a much lower rate of interest (and again the interest on the btl borrowings is allowable for tax).

Are you sure on your assumption on the higher the cost of property the better the returns. In many cases the lower cost properties achieve a higher percentage return than more expensive ones.

Bumbles101

Thanks again, I guess we are not sure of anything right now, and a lower cost house is in some ways a much less nerve wracking proposition. Your suggestion makes perfect sense and seems like the simplest solution all round because it keeps the borrowing all in the one place. We will have a chat with our mortgage broker based on that and see what he says.