How to buy a second house?

AndyKernow

Hi all,

I'm not interested in becoming a property magnate with a huge portfolio but I do have a question regarding buying a new home by borrowing against equity I have in the original house (100% owned) for a deposit and then renting out the current home and using the rent towards paying a mortgage on a new home.

Ideally I don't want to sell my current home but would rather use it as a pension supplement. We've tried to sell it for a sensible price but it's sticking despite being fairly new, in a desirable area and immaculately presented, even at a price undercutting similar properties by a large amount.

I'm 50 and my wife is also 50.
She's a non taxpayer as she only works part time.

We own our own home outright as we managed to pay off the mortgage a few years ago.
We don't have a big deposit though as my wife only has a very small income.

We have seen a house we really like but can't sell our own. The values are similar so we are now wondering whether to borrow against our current home to release a deposit then rent the current house out to assist with mortgage payments.

For arguments sake both properties are worth around £350k.

What would be the options?
We've tried a few highly rated local estate agents but the more we think about it the less we want to sell our current home but could instead use it as a long term investment if at all possible.

need_an_answer

Before you go any further please read up on being a LL and all the obligations it would entail.

It is not quite so simple as deciding to rent and when you look into the business you may decide it is not for you

GM a respected poster on the forum has produced some good advice I think this is an up to date link but if not I'm happy to be corrected

https://forums.moneysavingexpert.com/showpost.php?p=67759929&postcount=7

Pixie5740

If after reading G_M's Guide to Tenancies in England & Wales (linked to above) and you still want to become landlords then there is such a thing as a Let to Buy mortgage. Generally you can release up to 75% of the equity in your current home and the rent should cover 145% of the mortgage payments.

You will incur the higher rate of SDLT (so £18k instead of £7.5k) when purchasing your new home. To minimise the amount of income tax payable on the rental income you may wish to consider owning the rental property as tenants in common with a split of 99:1 in favour of your wife since she has some tax allowance left.