Best way to go - ADVICE PLEASE

PaulUK_4

Firstly, we are due to see an accountant shortly to go over the contents posted here.

However, any input you guys want to give would be much appreciated.

Here goes (I'll try and keep it brief) :

I currently work (£16,500 pa gross)
My wife doesnt work (she gets c£1,500 pa savings interest in her name)

We have a £215,000 house, with zero mortgage, which we are trying to sell but its taking a while.

We are planning to go to the US and Canada in January 2006 for a 12 month holiday (no work). We will be buying an RV to live in, which we plan to import to the UK and live in for a further 12 months on our return). We will save c£27,000 in VAT and Import Duty by doing all of the above in the way mentioned - but that is a separate issue.

Our questions are :-

If we cannot sell the house, we are thinking of renting it out (c£850pm), but we would want to buy a small place for us to live for the next 6 months and then to rent-out for the 2 years we are away (and living in RV in the UK).

What do we do about a mortgage ?

I am thinking that because my wife doesnt work, we would be better putting everything in her name as the rental profit would be just below her tax allowance.

Our house is in joint names.

We would want to raise around £100k on the main house and buy a second for £120k (with a £50k mortgage).

Given that my income is small and my wife doesnt earn at all, what can we do ?

Do we try for a standard mortgage on the house and then ask them for permission to let after the first month ? - this would give £70k to put down on the second property.

Did the above make sense ?

Any ideas folks ??

Thank You in advance

paul

dag_2

but we would want to buy a small place for us to live for the next 6 months and then to rent-out for the 2 years we are away

Why? Would it not be better to just not let your house until you actually go to the states?

Maybe you feel that your current house is leaps and bounds bigger than what you need - and you're keen to turn the space into rental revenue as soon as possible. That's fine. But if you're prepared to live somewhere smaller, why not just rent?

Would you have wanted to buy this second smaller house either way? - with the proceeds of the first one if you do sell it, or by remortgaging it if you don't? I don't see why you have to live in it for six months before letting it out.

Perhaps you believe that this might save you money on capital gains tax when you sell it later on - but you'd be well advised to check this directly with HMCE yourself, and don't rely on your accountant's word for it.

I am thinking that because my wife doesnt work, we would be better putting everything in her name as the rental profit would be just below her tax allowance.

You'll definitely have a job to come back to, I take it?

Also - you have to decide how much you actually trust your wife. Sure - as a couple, you can take advantage of her unused tax allowances - but transferring all your assets into her name obviously puts you personally in a much weaker position.

PaulUK_4

Thanks for the reply Dag.

Yes, we have come to the conclusion that we are better to raise a BTL mortgage on our house, so that the rental income just about covers the interest payments and expenses - reducing (or eliminating) any tax payable.

We can then place the £130k into 2 savings accounts paying 5% each - providing £4.5k pa to my wife (tax free) and £2k pa to me.

We arent going to buy a second property yet, although we will rent one for 6 months prior to our "holiday".

I dont think the housing market is going to leap forward in the next 2 years - I think it will actually drop further - which would spread our £130k further when buying on our return.

Paul

I am now even thinking of taking a further £10k off our house (down to £205k, when we had a "buyer" at £225k last December).

After calculating agents fees, mortgage interest, rental hassle, etc etc I think we may be better off just putting the extra £200k into savings.