Buying a second property using equity from my first propert

AdrianC

Yes, it's withdrawing the tax subsidy for heavily-geared investors.

ciderboy2009

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?

Your income allows you to borrow a maximum of £200k as a mortgage.

If you are taking out a £200k mortgage on the new house then you've not got enough income to also take out a mortgage on your current house (the mortgage companies won't take your rental income into consideration).

Basically, the only way to realise the equity in your current house is to sell it.

00ec25

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?

the mortgage on the let property will be assumed to "wipe its face", ie the rental income covers the mortgage on that property, but does not provide any income which can be carried over to support a mortgage on the property you intend to live in

so based solely on your employment income it seems you can afford to borrow 200k?

if you want to buy a 475k property to live in then you will need a get a BTL mortgage on the first one of 275k so you have 475k of purchasing power in total.
That means the first property must be worth at least 367k to ensure there is at least 25% equity left in the property for the BTL lender's security.

if none of those figures work in reality then you cannot afford to buy a 475k property without selling

lishad

getmore4less wrote: »

Start with how much rent can you get for it?

I was told around £1200 then minus service charge and tax ... + repairs

AdrianC

£1200/mo on £350-375k property is around 4% raw yield. Before expenses...

Depending on the service charge, I think you may well end up subsidising your tenants, when everything's considered.

shirlgirl2004

Assuming you pay tax at 20% (and the house is valued at £350,000) the most you'll be able to borrow on your current home on a BTL mortgage is £210,000. If you're a higher rate tax payer it will be £180,00. On an interest only mortgage the mortgage would be about £1,200 which wouldn't allow for 12% agency fee, voids, maintenance, insurance etc so these would need to come out of your pocket. It's also a lot to pay out per month if your tenants don't pay and it takes you 10 months to get them out.

IF you decide you want to go down the BTL route it might be better to sell your current home and buy a smaller (cheaper) home that is geared to the BTL market.The advantage being that you could buy your new home without the stamp duty surcharge before paying a smaller amount of stamp duty on the BTL.

Thrugelmir

Ciaran123 wrote: »

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.

Few people have sizable sums of cash idly doing nothing.

Ciaran123

That’s simply not true, I’ve sold property to a cash buyers, been outbid or not preferred over cash buyers, the buy to let market is rife with cash rich investors. If you research the property boom in Manchester it’s astounding how many of the new builds are unavailable to first time buyers and mortgage holders, cash buyers hoovering up properties and foreign investment is obviously big news at the moment. Again, unaffected by lack of tax relief, already cash rich that’s the irony of the changes to tax relief on buy to let.

Millsyp

I already own my second property (which is used for holiday lets) having remortgaged my primary property 10 years ago to buy it, and I would now like to refinance and have a buy to let mortgage on the second property. Would I be able to do this?