Remortgage now but plan to rent out and move to a bigger place in the future

RockcliffRugby

35 y/o M & F with two young children coming to end of the fixed term on our mortgage and would like to move to a bigger place in the next 3-5 years. Our current mortgage is fixed at 1.75% but will increase to 4.74% at the end of the term and our LTV is approx. 68%.

Our current house is in a really good location and next to a fantastic school, which makes it an ideal property to rent out.

My dream scenario is that we can move to a bigger house but keep our current property to rent out, eventually using the rent pay off its own mortgage, put the kids through university, be a source of income when we retire and also (to sound morbid) pass on to the kids when we are gone.

The vast majority of our savings are tied up in our current house so we won't have a big deposit unless we release equity.

As the fixed term on our mortgage is up for renewal in the next 3 months I want to make some good decisions around it, taking my dream scenario into account.

Have any of you guys got any experience doing this or provide me with some top tips?

Thanks

kingstreet

When do you plan to do this?

This will determine if you take a customer retention product from your current lender and start your plans when that ends.

When you do get around to it, you'll be remortgaging the current property as a let to buy, subject to equity/valuation and the rental income potential. Assume you'll have to leave 25% of the value behind and the minimum rent will need to be 140% of the monthly mortgage interest assuming a rate of 5.5% pa.

The residential should be based on normal affordability with no 'cost' from the let, providing it's viewed as self-financing as set out above.

Watch out for the Government reducing what you can claim against tax and you having to pay more.

Watch out for the second property SDLT surcharge which you'll pay on your new purchase.

Finally, read up on landlord responsibilities and Capital Gains Tax in future.

RockcliffRugby

kingstreet wrote: »

When do you plan to do this?

In the next 3-5 years, basically at the end of our next fixed term.