BTL mortgage or remortgage existing house

inkie

Just looking at options.
We own our house outright (value circa 90k)
Next year we are wanting to buy an additional property which will be lived in by family. We will need about £30k on a BTL for that property. Over 15 yr term

Is that the best option or can we take out a mortgage against our existing property and pay cash for the other property?
What are the implications of each F these options?
Thank you in advance.

Cakeguts

How are you going to pay the mortgage if they don't pay the rent to you?

You will still have to be landlords and stick to the legal rules of being a landlord.

Do not take out a loan against your property. If anything goes wrong with this idea you could lose your home as well as the rental property.

inkie

They wont pay rent - we are covering costs

Lloyd90

If you were to remortgage your home and buy the BTL outright you wouldn't have to faff about working out what percentage of the income you can have as mortgage relief as you wouldn't have a mortgage.

It may also be cheaper to have a residential mortgage on your own property than what you could get on a buy to let mortgage.

Some lenders would not be happy about renting to family I believe, although if you own the rental outright then the only mortgage you have would be your personal one so this might not be a problem.

You'd probably be best speaking to an independent financial advisor and possibly a mortgage advisor/broker.

Be warned mixing family and money can be messy.

anselld

Most BTL lenders do not like you renting to family so you would be severely restricted in the choice of available lenders and that will inevitably push the rate up.

It will be cheaper to raise finance on your existing property and you will be free to purchase and manage the BTL as you see fit.

Finally you are not restricted by the LTV of the BTL property. You could raise up to 100% of the BTL purchase value if you wish, provided it is within the LTV of your residential mortgage.

csgohan4

Never let to family if you do not intend to evict them for unpaid rent

Typhoon2000

Lloyd90 wrote: »

If you were to remortgage your home and buy the BTL outright you wouldn't have to faff about working out what percentage of the income you can have as mortgage relief as you wouldn't have a mortgage.

It may also be cheaper to have a residential mortgage on your own property than what you could get on a buy to let mortgage.

You can still claim relief on interest on finance costs if you borrowed money secured on you home to buy the BTL outright.
It does not matter if the money was borrowed by way of mortgage (on the BTL or another property), personal loan, credit etc..

inkie

Or getting an unsecured personal loan and paying cash for the rental would make things significantly easier and straightforward?

G_M

1) BTL mortgage.
* higher interest rate /costs
* easier to calculate mortgage interest (and show HMRC) for tax reduction
* many lenders prohibit letting to family

2) Increased residential mortgage
* cheaper
* can still subtract interest from letting profit for tax purposes but only that part used for the BTL purchase so harder to calculate and potentially harder to satisfy HMRC the purpose of the loan
* risk on the letting business transferred onto your home

You can never entirely guarantee the rent will be paid. Son gets made redundant/falls ill, Divorce etc - if the rent dried up through no fault of his, would/could you evict? If not, could you still pay the mortgage?

See also:

Tenancies in Eng/Wales: Guides for landlords and tenants This thread is intended to provide information to both landlords and tenants relating to Assured Shorthold Tenancies (ASTs) in England and Wales.

Topics covered:

* Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new protection (2015)

* Deposits: payment, protection and return

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

* Rent increases: when & how can rent be increased?

* Repossession: what if a LL's mortgage lender repossesses the property?

* New landlords: advice, information & links

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

pawlala

G_M wrote: »

* can still subtract interest from letting profit for tax purposes but only that part used for the BTL purchase so harder to calculate and potentially harder to satisfy HMRC the purpose of the loan

Do you have a link to any guidance on this specific scenario please? I can't seem to find what I'm looking for

teddysmum

Even family with the best of intentions will put other debts before those owed to 'just mum and dad' who 'will be more sympathetic' about late or missed payment.