Buy to Let existing home and Purchase another to live in.

DE_612183

Ok, so I've got a plan bumping around in my head - but not sure how feasible it is, so please feel free to point out the potential things that could go wrong!

My current house is worth about £450k, and I have £225k outstanding on the mortgage.

I also have about £100k in savings.

I'm 61 years old.

I was thinking of renting out my current property and using a BTL mortgage ( can you have these interest only ) so that the property will ( probably increase in value ) increase in equity over 5 years.

I'll use the £100k savings as a deposit on a new house and pay on a repayment basis on a £300k property for 5 years.

In 5 years I'll sell both and hopefully have enough to be mortgage free.

My current income is about £70k before tax - I'm guessing that on an affordability calculator the two incomes combined I would not be able to afford - but as 1 is BTL does that come into play?

Any questions / pointer please?

Keep_pedalling

Is that £70k income from employment? If it is I would be looking at getting as much of that in a pension as I could to reduce my IT bill rather than lumbering myself with the responsibilities of being a landlord and taking on more debt.

DE_612183

Keep_pedalling said:

Is that £70k income from employment? If it is I would be looking at getting as much of that in a pension as I could to reduce my IT bill rather than lumbering myself with the responsibilities of being a landlord and taking on more debt.

£70k is part employment part pension roughly 60/10

Hoenir

You need to crunch the numbers fully. As a 40% taxpayer might not be as attractive as you think.  

kempiejon

DE_612183 said:

My current house is worth about £450k, and I have £225k outstanding on the mortgage.
...
I also have about £100k in savings.
...
I'll use the £100k savings as a deposit on a new house and pay on a repayment basis on a £300k property for 5 years.
....
In 5 years I'll sell both and hopefully have enough to be mortgage free.

You have £225k equity in your current house, you have £100k savings you want to buy a house £300k and be mortgage free in 5 years.
Your numbers look mortgage free to me now.
Spend the next few years filling your pension provision and make a retirement plan without the committment to servicing a mortgage and being a landlord.

DE_612183

The problem is I don't want to stay in the current house and I am having problems selling - market is very slow.

I also thought that increasing equity in two houses would get me to the place I want to be quicker than in one.

kempiejon

Where is the place you want to be? Mortgage free in 5 years was the statement in your first post I copied part of.

Bookworm105

DE_612183 said:

The problem is I don't want to stay in the current house and I am having problems selling - market is very slow.

I also thought that increasing equity in two houses would get me to the place I want to be quicker than in one.

so why do you think that property will have meaningful equity growth over what is a rather short time period of 5 years if it is hard to sell at present?

CGT rates in 5 years time may well be harmonised with income tax rates so you could lose 40% of any equity gain to CGT 

FlorayG

BTL mortgage is based on the rental value of the property not your income so you can do that. Have you looked at the local rental market? Do you know how much rent you might get and how desirable the property would be to potential tenants? Are you prepared to have the house trashed ( it happens) or tenants default on payment and can afford the outcome of that? You probably will get decent tenants but you MIGHT get difficult ones. Just renting out a house is not as simple as it was years ago

FlorayG

Also "in 5 years I'll sell both"
What if your tenant doesn't want to leave? If you end up evicting them because you want to sell you will then have an empty house you are paying mortgage on for however long it takes to sell it. You can sell it with tenant in situ but that will considerably reduce its value

PRAISETHESUN

There are a lot of responsibilities with being a landlord, and it's not something I'd recommend you undertake lightly. I'd recommend doing some reading on the things you need to do, as getting even one of them wrong can cause problems. 

As other have said, there's no guarantee your property will increase or even hold it's value over the next 5 years. Additionally, you might have issues with a problem tenant and evicting them can be long and costly, especially if they don't want to cooperate. Getting them to move on your timescale when you finally want to sell could be costly, or you risk having a substantial void period.