Buy to Let on Half my house.

smiffy

I'm currently investigating the possibility of converting my property back into two cottages. Now obviously I have to jump through a lot of planning hoops, but assuming I eventually get this permission I'd end up owning two semi-detached homes instead of my current single detached one.

What I'd the like to do is get a "buy to let" mortgage on the empty side and use that money to reduce my personal mortgage. So the initial questions are financial and tax related as the potential income would be needed to justify some of the anticipated expense of the conversion.

So approximate figures are:

Current detached Value = £360k
After split = My House Value = £200k+ and New house = £160k+
Conversion cost = £40k
Anticipated rental income = £625 pm

I'd be looking to take out a BTL mortgage of £80k against the £160k property - thus reducing my own mortgage by £40k

Would the £40k I pay myself towards my existing mortgage be subject to any tax?
Would I have to pay income tax on the £625pm?
Would I be better off by getting the largest BTL mortgage available?
Is the BTL mortgage payment deducted so I only pay tax on the "profit" part.


or what if I did the conversion and just sold off that other home for £160k - would that gain be subject to any tax?

clutton_2

you really need specialist advice here - but a few thoughts

BTL mortgages are getting more and more difficult to get since the credit crunch - there are now less than a quarter of the mortgage products on offer than this time last year.

why not sell the next door property and pay off your mortage if you can ?

or why not sell the detached house as it is now and downsize and pay off your mortgage that way



lenders will often specify you cannot buy the "house next door" - this may have consequences for your plans