Buying a second property using equity from my first propert

lishad

Thrugelmir wrote: »

A long way short of £475k.

If the Bank lend me 200k then the equity form the first property will cover the 250K and the rest of it to pay stamp duty and other expenses.
Just an advice if it's a good opportunity. thanks

Ciaran123

What little advice i can give hopefully will help.
Yes if you have no mortgage on you're home you could remortgage to release cash and you could use this to purchase a second home. You need to do a lot of homework and planning though to ensure its the right investment for you. You have already mentioned the stamp duty surcharge on second homes but there is also the tax to pay on rental income. It used to be that you could claim tax relief on mortgage payments on a second home but this is being phased out and by 2020 you will pay tax on all the rental income, less whatever expenses are deductible. This tax change now favours cash buyers, and makes it more difficult for people who want property as an additional income. This is the irony of the tax change, people who have large amounts of capital are unaffected. If you could raise the capital to buy your second home for cash it will save you a lot of money on tax and you will not be worried so much about riding fluctuations in property price, or void periods as you wont have a mortgage to pay. The alternative way to avoid tax is to purchase through a limited company, but there are still tax implications with this such as capital gains and you really need to do your own research and see an accountant to fully understand the burden of tax when becoming a landlord.
You also need to factor in all other costs such as maintenance of the property,purchasing fees and so on, the cost of your own mortgage then becomes a factor if remortgaging, the cost of your time also!
As others have said you need to compare this against other investments. Becoming a landlord is not the only option, but in the right circumstances and with enough planning can be viable and provide a steady income. In my opinion, it is also easier to understand and control than stocks and shares.
Hope this helps

AdrianC

We have no idea if it's a good opportunity or not. You have not given anywhere NEAR enough information.


What yield are you working from?
What expenses are you factoring into that?
What allowance have you made for voids, maintenance, damages?

ciderboy2009

lishad wrote: »

If the Bank lend me 200k then the equity form the first property will cover the 250K and the rest of it to pay stamp duty and other expenses

How are you planning to access the equity from the first property without selling it?

If your mortgage co will only lend you £200k based on your income then that's all you're going to get.

lishad

ciderboy2009 wrote: »

How are you planning to access the equity from the first property without selling it?

If your mortgage co will only lend you £200k based on your income then that's all you're going to get.

If I sell it then it won't be a second property. I am planning to keep it and remortgage it and rent it out and the rental income covers the mortgage. The equity from that property and a bit of borrowing will get me a new place. Isn't it how people do it?

lishad

Ciaran123 wrote: »

What little advice i can give hopefully will help.
Yes if you have no mortgage on you're home you could remortgage to release cash and you could use this to purchase a second home. You need to do a lot of homework and planning though to ensure its the right investment for you. You have already mentioned the stamp duty surcharge on second homes but there is also the tax to pay on rental income. It used to be that you could claim tax relief on mortgage payments on a second home but this is being phased out and by 2020 you will pay tax on all the rental income, less whatever expenses are deductible. This tax change now favours cash buyers, and makes it more difficult for people who want property as an additional income. This is the irony of the tax change, people who have large amounts of capital are unaffected. If you could raise the capital to buy your second home for cash it will save you a lot of money on tax and you will not be worried so much about riding fluctuations in property price, or void periods as you wont have a mortgage to pay. The alternative way to avoid tax is to purchase through a limited company, but there are still tax implications with this such as capital gains and you really need to do your own research and see an accountant to fully understand the burden of tax when becoming a landlord.
You also need to factor in all other costs such as maintenance of the property,purchasing fees and so on, the cost of your own mortgage then becomes a factor if remortgaging, the cost of your time also!
As others have said you need to compare this against other investments. Becoming a landlord is not the only option, but in the right circumstances and with enough planning can be viable and provide a steady income. In my opinion, it is also easier to understand and control than stocks and shares.
Hope this helps

thank you ... lots of good info. Shame about the tax for people with small capital. Will be meeting a mortgage broker soon and will sit down and calculate ...

leon103

lishad wrote: »

If I sell it then it won't be a second property. I am planning to keep it and remortgage it and rent it out and the rental income covers the mortgage. The equity from that property and a bit of borrowing will get me a new place. Isn't it how people do it?

How are you release the equity from the property? from what I have read you are only able to borrow 200k so that's all you have for a new property

Pixie5740

Ciaran123 wrote: »

What little advice i can give hopefully will help.
Yes if you have no mortgage on you're home you could remortgage to release cash and you could use this to purchase a second home. You need to do a lot of homework and planning though to ensure its the right investment for you. You have already mentioned the stamp duty surcharge on second homes but there is also the tax to pay on rental income. It used to be that you could claim tax relief on mortgage payments on a second home but this is being phased out and by 2020 you will pay tax on all the rental income, less whatever expenses are deductible. This tax change now favours cash buyers, and makes it more difficult for people who want property as an additional income. This is the irony of the tax change, people who have large amounts of capital are unaffected. If you could raise the capital to buy your second home for cash it will save you a lot of money on tax and you will not be worried so much about riding fluctuations in property price, or void periods as you wont have a mortgage to pay. The alternative way to avoid tax is to purchase through a limited company, but there are still tax implications with this such as capital gains and you really need to do your own research and see an accountant to fully understand the burden of tax when becoming a landlord.
You also need to factor in all other costs such as maintenance of the property,purchasing fees and so on, the cost of your own mortgage then becomes a factor if remortgaging, the cost of your time also!
As others have said you need to compare this against other investments. Becoming a landlord is not the only option, but in the right circumstances and with enough planning can be viable and provide a steady income. In my opinion, it is also easier to understand and control than stocks and shares.
Hope this helps

Q) How exactly do cash buyers pay less income tax on the rental income than those purchasing with a mortgage?

A) They don't, the income tax is exactly the same but for now those who borrow money to fund a BTL can offset some/all of the mortgage interest against the income tax therefore reducing the amount of income tax due. However, the interest payable is probably much higher than the tax saved.

getmore4less

lishad wrote: »

My property is worth around 350-375K. What I want to buy for myself is around 450-475k. What are the pros and cons?

Start with how much rent can you get for it?

Ciaran123

True, but it's true that cash buyers are unaffected by the tax changes. The reduction in tax relief is a massive issue for buy to let landlords who need to borrow, no issue if you're already cash rich and don't need a mortgage.