Remortage - Buy to Let

TF03

Hi all,

So we have been looking to move for a while now. Unsuccessfully went on the market last year (estate agent didn't help mind...)

Anyway we have thought about a different route - buy to let. And I have a few questions that hopefully I can get some advice on.

Our situation: We own outright our property. No mortgage. Approx value £180k. It is a leasehold and we have the freeholders permission and deeds changed to allow letting. (As we were going to sell it as a buy to let opportunity anyway this time round).

Can we remortgage our property on a buy to let? Am I right in saying that it tends to be up to 75% of the value? We would be looking for £100-125k, which we would then use as a cash deposit on our next property and mortgage.
Is this possible?

Secondly, are all BTL mortgages interest repayment only?

Thirdly, the rent has to be 25-30% higher than the mortgage repayment am I right in saying?

Am I right in saying that any rental income we make is classed as an income? So would be taxed along Income Tax thresholds?

Stamp Duty: Buying the second property will cost about £15k. If we sell the property we are renting out within 3 years, are we entitled to a Stamp Duty refund or have I misunderstood that?

It's an avenue that we would like to consider as long as the sums work out. We aren't looking to make profit (obviously that would be nice to put towards the mortgage payment on what would be our house), we just want to cover all the costs of renting out as a minimum.

Thanks in advance.

Nathan_Hughes

I'll do my best to answer some of these

Yes, 75% is usually the maximum LTV on BTL mortgages. So you should be able to remortgage the property and use the funds for a deposit elsewhere.

Rent requirements can be as high as 145% of mortgage repayments depending on the lender.

Rent will be classed as income, but many BTL landlords use a Special Purpose Vehicle which can sometimes be a more tax efficient method. Otherwise, yes it will be added to your income and taxed at your highest marginal rate.

Yes, SDLT surcharge is refundable if you sell the 1st home within 3 years.

TF03

Nathan_Hughes wrote: »

I'll do my best to answer some of these

Yes, 75% is usually the maximum LTV on BTL mortgages. So you should be able to remortgage the property and use the funds for a deposit elsewhere.

Rent requirements can be as high as 145% of mortgage repayments depending on the lender.

Rent will be classed as income, but many BTL landlords use a Special Purpose Vehicle which can sometimes be a more tax efficient method. Otherwise, yes it will be added to your income and taxed at your highest marginal rate.

Yes, SDLT surcharge is refundable if you sell the 1st home within 3 years.

Thanks for the answers. That's all positive. I'm glad I was right with the Stamp Duty as if we do decide to sell the 1st home within the 3 years, at least that is a significant sum of money back.

I've never heard of the Special Purpose Vehicle, guess time to do more reading!

grumiofoundation

Make sure you read everything in the link below if you want to become a landlord
https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants

Couple of points you might want to consider

a) Do you want to be a landlord?
b) What is the actual return you will be getting? is this really a better deal than simply just selling at a reduced price? As you have been unable to sell as a Buy to Let investment this means it is likely this wont be a great return.
c) Having a buy to let mortgage may impact your affordability in getting a second mortgage.
d) Will you be able to afford both mortgages if you are unable to rent out the property/tenant doesn't pay rent?