Interest only mortgage

The_Bridge

Hi
Please bear with me as I try to explain.
I was left some inheritance some years ago and bought 2 properties outright [the smaller property was rented and the other we live in], therefore I am in the very fortunate position of being mortgage free. I have zero knowledge on the subject, hence my post and would love to know your opinions.
My husband and I are selling the smaller property for £150k and would like to move into another house. I always had it in my mind that we would sell both properties and buy another larger property to live in, again mortgage free.
However, my husband and I spoke to a financial advisor and he mentioned interest only mortgages. This is the scenario;
Use £150k as a deposit for a new house but do not sell the house we currently live in, use it to get an interest only mortgage of £300k [the house is worth £400] and rent it. The rent is a guarantee the mortgage will be paid. My husband is in favour of this as we would have 2 properties but as I'm  honestly not financially savvy, I don't know what to do. 
Any advice would be much appreciated. 
Thanks for reading if you go this far!
 

Thrugelmir

The_Bridge said:

The rent is a guarantee the mortgage will be paid. 

Have you crunched the numbers fully and considered all the what if's ? When running a business nothing is ever guaranteed. 

K_S

The_Bridge said:

Hi
Please bear with me as I try to explain.
I was left some inheritance some years ago and bought 2 properties outright [the smaller property was rented and the other we live in], therefore I am in the very fortunate position of being mortgage free. I have zero knowledge on the subject, hence my post and would love to know your opinions.
My husband and I are selling the smaller property for £150k and would like to move into another house. I always had it in my mind that we would sell both properties and buy another larger property to live in, again mortgage free.
However, my husband and I spoke to a financial advisor and he mentioned interest only mortgages. This is the scenario;
Use £150k as a deposit for a new house but do not sell the house we currently live in, use it to get an interest only mortgage of £300k [the house is worth £400] and rent it. The rent is a guarantee the mortgage will be paid. My husband is in favour of this as we would have 2 properties but as I'm  honestly not financially savvy, I don't know what to do. 
Any advice would be much appreciated. 
Thanks for reading if you go this far!

@the_bridge From what I can understand, you are looking to take out a 75% LTV buy to let mortgage against your currently unencumbered (mortgage-free) house worth 400k and release 300k to use towards a new residential property? As expereinced landlords, assuming the estimated rent stacks up (at higher values, it doesn't always do so), you should be able to get a BTL mortgage, though your choice of lenders will be slightly limited as you have lived in the property, making it a regulated BTL mortgage.

Do note that you will need to pay a 3% stamp duty surcharge (assuming in England) for your new purchase.

gizmo111

How much is the new house?

ACG

There are a number of possible tax implications. Capital gains tax, income tax and stamp duty. You will also have 2 tenants then, you might have 2 good tenants, you might have 2 nightmare tenants. You need to consider everything.