2nd property, another paid off - what deposit/taxes I will be paying?

mustiuc

Good morning

looking for some advice/ideas

Living in South Wales, willing to buy another property either in Cardiff and/or Bristol - obviously, due to the difference in housing market, I am aware that Cardiff might offer a house, Bristol a flat - for the money/affordability (if willing to move straight in, no refurbishments)

I already have a mortgage, paying 1k extra/month (still have one of those ultra-low interest rates that made me push hard to finish the loan by the time fix ends). Once this property is paid off, I am planning to buy a second one (already have a big chunk of savings not doing much/mental comfort) - mostly thinking ahead for children - UNI cities, not renting others houses, etc.
 
Scenarios:

- keep the current property paid off, buy a second one as "home mover" and let the 1st paid off - do I have to pay SDT/LTT? will the 2nd property be classed as BTL/2nd home and lenders would require a minimum of 25% deposit (as it happens with all BTL)?
- live in the property paid off, but the second will automatically be classed at BTL - I am aware of 25% deposit, SDT/LTT and any other fees
- sell the property paid off, buy something else either cash or finance the difference - a bit uncomfortable with the idea of making overpayments for years to get rid of the first mortgage, to then add more on moving/level-up (since 2019 I used each overpayment allowance, isn't easy to grasp spending X years to get rid of one mortgage and then get back in debt)

Do I have other alternatives in this situation? I am not interested having more than two properties. 


Thank you

housebuyer143

You need to pay the additional stamp duty on the new house, it's 3% in England and currently 4% in Wales, so the Welsh house with stump you with a higher tax bill because land transaction tax is more expensive in general in Wales.
The house own outright is just that and you don't need any deposit on it or even to call it a BTL. Your new place will just be on a normal mortgage. 
If you plan to rent it there might be an argument for having the mortgage on it BTL as you get 20% tax credits on the interest paid, which you don't on residential.

propertyrental

Being 'paid off' is irrelevant so far as 2nd property tax is concerned. You buy a 2nd property, you  pay 2nd property tax (4% in Wales.

If you buy a property as an investment/BTL, you'll need to comply with te mortgage lender's BTL requirements. Different lenders have different requirements, so speak to an independent mortgage broker.

mustiuc

Hi both
Thank you for your replies
So regardless where I choose living afterwards or paid in full or not, SDT/LTT applies anyways. The taxation benefit it's a good point, haven't thought about it 

Wish you a great day! 

_Penny_Dreadful

mustiuc said:

Hi both
Thank you for your replies
So regardless where I choose living afterwards or paid in full or not, SDT/LTT applies anyways. The taxation benefit it's a good point, haven't thought about it 

Wish you a great day! 

Are you buying an additional residential property?  Yes, therefore the higher rate of SDLT or LTT, depending on whether you buy in England or Wales, for the purchase of additional residential properties will apply to the purchase of your additional residential property.