Advice Pls

mummy2014

Hi
We are in the process of buying our first house.
However we have just found out that in 6 months time we are going to be given a substantial amount of money. My husband would like to buy another house and rent out the first the house. How would we go about doing this? would their be any implications etc?

many thanks

amnblog

There are tax implications so you should consult an accountant first.

There are legal requirements in being a landlord, so get familiar with them.

Your stamp duty tax bill on the purchase with be increased so make sure you understand that.

If you are leaving lending on your current home you need to advise your lender and get permission to let.

ACG

You would need to apply for a Buy to let mortgage.
You would have to pay stamp duty at a higher rate than you do for yor purchase this time.
You would typically need a 25% deposit.
The rent would need to be around 125% of the monthly repayments on an assumed rate of around 6% on an interest only basis.

It could be worth sitting down with a broker to go over it all in more detail.

mummy2014

would we need a buy to let mortgage on the second house as that would be the family home as we would move from the first one to that one and rent out the first one.

ACG

You would need the BTL on the property that you let out. However, your residential mortgage lender may allow you to let the property out, but they are under no boligation to do so and if they decline your request you would have to pay the early repayment charges.

Thrugelmir

Have you considered aborting your current purchase. If the funds are only 6 months away? Then once you have the money think through your options more carefully. Easy to think that buying a property to let is a road paved with gold. Having the majority of one assets in a single market means that's a huge downside if prices to fall, or simply not rise at all.

Second home will incur you with a sizable stamp duty bill.

steampowered

Your mortgage lender will take into account the first mortgage when considering how much to lend against the second house.

You will have to pay a higher rate of stamp duty on the second property.

The mortgage on the first property would need to be a BTL mortgage. BTL mortgages require a higher deposit than main home mortgages. Typically a deposit of 25% is required.

If you take out a 'fixed rate' main home mortgage against the first property, such as a 2-year fix, there will be a break fee if you need to remortgage to do BTL.

Your plan sounds fine, so long as you have factored the above costs into consideration, as these will affect the amount you can afford for your main home. I suppose it ultimately comes down to whether the money you are receiving is enough to cover the additional costs.