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Using rent to pay another mortgage

Is this possible / feasible?

I own a flat fully paid for & I could rent out to for about £1600.  Could I buy a small house for about £120k and just use the rent on the mortgage ?   

Eventually the 2nd place would be paid for 

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Comments

  • Hoenir
    Hoenir Posts: 7,742 Forumite
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    The net rental income would be taxable. 
  • mrbonds
    mrbonds Posts: 34 Forumite
    Part of the Furniture 10 Posts
    Hoenir said:
    The net rental income would be taxable. 
    Minus the difference I pay to the mortgage?
  • grumpy_codger
    grumpy_codger Posts: 1,230 Forumite
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    mrbonds said:
    Hoenir said:
    The net rental income would be taxable. 
    Minus the difference I pay to the mortgage?
    What 'difference' do you pay?
    You can possibly get a BTL (re)mortgage against your flat and in this case, AFAIK,  the interest part of your repayments will reduce your taxable rental income.
  • mrbonds
    mrbonds Posts: 34 Forumite
    Part of the Furniture 10 Posts
    mrbonds said:
    Hoenir said:
    The net rental income would be taxable. 
    Minus the difference I pay to the mortgage?
    What 'difference' do you pay?
    You can possibly get a BTL (re)mortgage against your flat and in this case, AFAIK,  the interest part of your repayments will reduce your taxable rental income.
    I'm not working so not paying tax.  So your saying the rent income is taxed even if it was going into a mortgage?  Or do you mean what's left after I pay the mortgage is taxed. 
  • grumpy_codger
    grumpy_codger Posts: 1,230 Forumite
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    edited 29 March at 8:46AM
    mrbonds said:
    mrbonds said:
    Hoenir said:
    The net rental income would be taxable. 
    Minus the difference I pay to the mortgage?
    What 'difference' do you pay?
    You can possibly get a BTL (re)mortgage against your flat and in this case, AFAIK,  the interest part of your repayments will reduce your taxable rental income.
    I'm not working so not paying tax.  So your saying the rent income is taxed even if it was going into a mortgage?  Or do you mean what's left after I pay the mortgage is taxed. 
    It doesn't matter where it goes. If you don't work, only the amount exceeding your personal allowance is taxed:
    Tax rates 2024/25: tax bands explained
    Some expenses can reduce taxable rental income, e.g. the interest (not repayments!) on the mortgage for this particular property: https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income#allow-expense


  • silvercar
    silvercar Posts: 49,936 Ambassador
    Part of the Furniture 10,000 Posts Academoney Grad Name Dropper
    edited 29 March at 3:11AM
    The mortgage has to be taken out for the purpose of buying the BTL, it doesn’t matter where it is secured. So you’d be arguing that your mortgage on the new home is only needed because you are not selling your current home. I’m not sure the view hmrc would take on that. Better to get a BTL mortgage on your current place.

    factor in an extra 5% SDLT on the new place
    I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • BikingBud
    BikingBud Posts: 2,622 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    mrbonds said:
    Is this possible / feasible?

    I own a flat fully paid for & I could rent out to for about £1600.  Could I buy a small house for about £120k and just use the rent on the mortgage ?   

    Eventually the 2nd place would be paid for 

    Try this : Tenancies in Eng/Wales: Guides for landlords and tenants
  • housebuyer143
    housebuyer143 Posts: 4,284 Forumite
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    You wouldn't end up with £1600 a month. You pay tax over the threshold, then you have to pay an agent (and you probably should a you don't seem to have any prior BTL experience), and the additional 5% stamp duty on the new place you buy. 
    Then when you factor in maintenance, service charges and complying with the legal requirements you will definitely not be in netting £1600. 

    If you got a BTL mortgage instead and used that to buy or part fund the new house you would be able to get a credit for the BTL mortgage interest, so you will save on the tax side.
  • Emmia
    Emmia Posts: 6,276 Forumite
    Fifth Anniversary 1,000 Posts Photogenic Name Dropper
    With no income, could you financially cover any voids in rent through having no tenants, or non paying tenants? 

    Whether you remortgage against your current home or BTL that's something you need to seriously consider. 
  • mrbonds
    mrbonds Posts: 34 Forumite
    Part of the Furniture 10 Posts
    Emmia said:
    With no income, could you financially cover any voids in rent through having no tenants, or non paying tenants? 

    Whether you remortgage against your current home or BTL that's something you need to seriously consider. 
    It would go to a letting agency so they pay you regardless if the property is occupied or not. 
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