2nd property options

meemawuk

I just got married and we currently own a flat valued at 125k and an outstanding mortgage of 85k (+10k savings) which will be up for renewal early in the new year.

Our plan is to buy a house ~150k to live in and we will rent our current property out. The rough calculator says we should be able to borrow 210k with both of our earnings at 30k.

I am going to speak to my mortgage advisor but I'd like to have a rough idea what our options will be.

As far as I understand it we could switch the flat to BTL (removing required equity) and get a second product for our residential property. I have no idea what this entails. People seem to talk about rent being 25% more than interest repayments but when I look online most products are repayment and not interest only?? I also have no idea what the tax implications are? On interest only as I understand it we could run the flat like a business and invest the income to reduce tax? Do I need to have a registered business to do this? Anything else I need to think about here or any essential reading sources to better understand this whole process would be appreciated.

Option 2 is remove equity when I remortgage, seek consent to rent from my lender and then use the equity removed plus savings to get a second mortgage. Obviously this relies on my lenders agreeing to me renting. Anything else I need to think about here?

Thirdly, get a product that lumps both properties together. Is this even an option?

Can anyone help me understand this whole situation?

Thanks!