Buying a second house before selling first?

Seanymph

We live in a house which is in my name, my husband has sold his property already. I have no mortgage.

We know where we want to buy - but we don't want to move there just yet, so are considering buying now (house prices keep going up there) and renting it out.

As we are just starting to explore this - IF we bought the new house in both names would we get caught in the increased stamp duty?

Would we be better raising the money on our residential home? Or the house we intend to buy and rent out?

Can anyone add anything to the mix that may be useful for me to think about please?

marliepanda

Yes you'd pay the extra stamp duty.

davidmcn

marliepanda wrote: »

Yes you'd pay the extra stamp duty.

But be able to reclaim it if you sell house 1 within 3 years.

theGrinch

you would have to hand over your money to the government messing your cashflow and then request it back.

Seanymph

ok, so given the additional stamp duty - and the reclaim. Would the better choice be to mortgage the current one, therefore buying No. 2 (rented) outright, or buy the second with the mortgage on it?

Presumably it's a lower rate on a residential (ie my) property.

G_M

a residential mortgage is likely to be cheaper than a BTLmortgage.

A BTL mortgage is easier to show the link between loan and purchase for tax purposes.

There's a lot to consider.

See also:

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?

booksurr

Seanymph wrote: »

We know where we want to buy - but we don't want to move there just yet, so are considering buying now (house prices keep going up there) and renting it out.

how long will the delay be before you move in?

financing the purchase using a BTL mortgage and then moving into it to occupy it as the (new) main home may be regarded "unkindly" by the lender as a deliberate attempt to evade being assessed for a residential mortgage. For which the criteria are of course based on whether your income can stand a mortgage, not how much rent you will receive. You would need to check what their attitude would be to a BTL being converted to residential.

There is no reason why you cannot borrow against the current property (ire residential mortgage) and use the funds to purchase the new one. The interest paid on that borrowing would be allowed against your BTL income for tax purposes as long as the paper trail shows how you spent the money and that should be easy to show. As GM says a residential mortgage will be cheaper than a BTL mortgage,

check you understand any early redemption penalties on whichever type of mortgage you get, because presumably you will pay it off when the old house is sold and you move into the new one - or are you intending to remain LL and swap the 2 properties around?

read GM's links on becoming a LL, there is much you need to know

you are married, therefore it does not matter whether the property is one or both names, you are regarded as one "unit" for the purposes of SDLT and so would be purchasing an additional property before the current one has sold. Higher rate thus applies, but a refund can be claimed if old one sold within 3 years

Seanymph

Thank you all very much.

The start of the plan was to sell the property my husband owned, allowing us to buy a motorhome. The 'plan' is to finish off the house we live in, sell, and travel for several years in a motorhome - we also have a property in France we would like to stay in for an extended period.

We know where we want to 'return' to at the end of the travel - locationally - and had considered buying on our return.

Given the vagaries of house prices, and the temptation to spend everything in the bank - we now favour buying in our choice of area BEFORE going, renting it out, and ensuring we have a property to return to.

And we know we may have to wait some time for it to fall vacant/tenants to move out, but we are flexible.

So, plan a - finish this house, sell it, move into motorhome, THEN buy property outright and rent it whilst we travel.

plan b - buy now - finish and sell main house - and go with left over money once mortgage paid off.

Either way we would have a house with tenants, I'm just trying to work out whether to buy now (with only a deposit available) or wait until we have sold up completely, and pay outright - but that could be a couple of years.

Cakeguts

Sounds like a great plan on paper but there is a quite a big snag in it. The kind of house than tenants want to rent isn't always the same as owner occupiers buy to live in. So you could quite easily buy a house that you liked and then find that it is only attractive to the kind of tenant that you probably wouldn't want in your house.

What would you do if the tenant damaged the house or didn't pay the rent and you were living in your French house? The agents can only do so much. As a landlord the repairs and mortgage payments are your responsibility and you have to pay even if you are not getting any rent.

It you want a buy to let get a house that rents easily to good tenants. If you want a house that you would like to live in and it isn't the same as a house that rents easily then don't let it.