Buying a new house without selling old one?

Subculture

We are about 7 months away from paying the mortgage on our house and we would like to move to a bigger place just outside the city with a garden. However we would like to keep our existing house and rent it out.
We are bought our current house on an interest only basis in 2003 and by paying extra monies, will have paid it off half way through the 25yr term. We would like like to take out another interest only loan but have been told these are only available on Buy to let mortgages?

Our current house is worth around £600k and we would like to buy something for around £800k We are both employed, I earn £80k and my wife £55k. We have no outstanding loans besides the mortgage and credit cards are paid in full by direct debit and have 2 children under 12. We have around £250k saved up for a deposit and fees but have been told that that we should borrow as much as we can on our current home to use as a deposit on our new house as this money can be set against rent income for tax purposes, and not use any of our savings.

First is this plan possible and is maximising borrowing on the first property the best advice?

Thanks

getmore4less

If done properly any borrowing should be eligible for tax relief.

kingstreet

Saving tax is good, but what about the interest rates?

We're doing a few LTB/Purchase combos at the moment and we are working to keep both mortgages under 60%, to minimise the rates in each case.

Thrugelmir

Does renting out your current property make financial sense? You need to crunch the numbers fully. Taking all factors into account. As you are still going to be exposed to £550k of debt. Which may not be so palatable once interest rates start to rise.