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  • FIRST POST
    • billy2shots
    • By billy2shots 10th Nov 18, 8:03 AM
    • 108Posts
    • 117Thanks
    billy2shots
    Help. Using home to fund a house purchase
    • #1
    • 10th Nov 18, 8:03 AM
    Help. Using home to fund a house purchase 10th Nov 18 at 8:03 AM
    Current situation

    - Mortgage free on a home with a value of circa £325-£350k

    - 36 years old , married with 2 children.

    -Household Income £56k per year

    - would like to buy new property currently for sale at £425k

    Objective

    - Purchase the second property which will be the family home and rent out current property.

    - Be as tax efficient as possible

    Challenges

    - Increased stamp duty rate for purchase of second property. Exaggerated because I'm doing things backwards and buying a more expensive property as a second home.

    - Total borrowing would be £450k
    - I would effectively need a £200k mortgage on property 1 valued at £325k and £250k mortgage on property 2 valued at £425k. With my income (and potential rent income from property 1, £1k a month before tax) I'm not sure I would secure the finance.



    Help!!!

    Does what I'm proposing make sense and is it realistic?

    How would I even go about something like this?

    If it is feasible, are there more tax efficient ways to go about things than others.

    In my mind it's simple. Sell property 1 and buy property 2 meaning a much smaller total mortgage and less stamp duty. The Mrs however is very reluctant to sell the home where we married and the kids were born.
    Last edited by billy2shots; 10-11-2018 at 8:06 AM.
Page 1
    • Mutton Geoff
    • By Mutton Geoff 10th Nov 18, 8:29 AM
    • 1,215 Posts
    • 1,340 Thanks
    Mutton Geoff
    • #2
    • 10th Nov 18, 8:29 AM
    • #2
    • 10th Nov 18, 8:29 AM
    Why complicate your life, increase your debt and force yourself into a business you donít know much about for the sake of nostalgia?
    Compensation/Refunds - £4,165 | Stooz Profits - £7,636 | Quidco - £4,060 | Tax Avoidance - £107,000
    All with a big thank you to Martin and MSE.com from Mutton Geoff!
    • billy2shots
    • By billy2shots 10th Nov 18, 8:35 AM
    • 108 Posts
    • 117 Thanks
    billy2shots
    • #3
    • 10th Nov 18, 8:35 AM
    • #3
    • 10th Nov 18, 8:35 AM
    Why complicate your life, increase your debt and force yourself into a business you donít know much about for the sake of nostalgia?
    Originally posted by Mutton Geoff

    I'm willing to look into it (which is why I'm asking here) if it makes my wife happy and if it makes financial sense in the long term.
    • AnotherJoe
    • By AnotherJoe 10th Nov 18, 8:55 AM
    • 11,407 Posts
    • 13,173 Thanks
    AnotherJoe
    • #4
    • 10th Nov 18, 8:55 AM
    • #4
    • 10th Nov 18, 8:55 AM
    Have you done the maths on being a landlord? Including the higher interest rate on your mortgage you'll be paying due to havinga worse LTV? The extra tax you'll pay on the rental Income? How long will it take to earn back the additional £13k from your profits ? (Not the income!)
    Are you aware of all the legal requirements of being a landlord? Have you considered that strangers will be living in the place and perhaps not treating it as you would let alone worse case.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • datlex
    • By datlex 10th Nov 18, 10:49 AM
    • 1,818 Posts
    • 1,724 Thanks
    datlex
    • #5
    • 10th Nov 18, 10:49 AM
    • #5
    • 10th Nov 18, 10:49 AM
    Current situation

    - Mortgage free on a home with a value of circa £325-£350k

    - 36 years old , married with 2 children.

    -Household Income £56k per year

    - would like to buy new property currently for sale at £425k

    Objective

    - Purchase the second property which will be the family home and rent out current property.

    - Be as tax efficient as possible

    Challenges

    - Increased stamp duty rate for purchase of second property. Exaggerated because I'm doing things backwards and buying a more expensive property as a second home.

    - Total borrowing would be £450k
    - I would effectively need a £200k mortgage on property 1 valued at £325k and £250k mortgage on property 2 valued at £425k. With my income (and potential rent income from property 1, £1k a month before tax) I'm not sure I would secure the finance.



    Help!!!

    Does what I'm proposing make sense and is it realistic?

    How would I even go about something like this?

    If it is feasible, are there more tax efficient ways to go about things than others.

    In my mind it's simple. Sell property 1 and buy property 2 meaning a much smaller total mortgage and less stamp duty. The Mrs however is very reluctant to sell the home where we married and the kids were born.
    Originally posted by billy2shots
    I'm willing to look into it (which is why I'm asking here) if it makes my wife happy and if it makes financial sense in the long term.
    Originally posted by billy2shots
    Seems to me your wife is happy with things as they are. You are bringing in a decent income and don't have a mortgage. Why get into unnecessary debt?
    • xylophone
    • By xylophone 10th Nov 18, 10:59 AM
    • 27,236 Posts
    • 16,299 Thanks
    xylophone
    • #6
    • 10th Nov 18, 10:59 AM
    • #6
    • 10th Nov 18, 10:59 AM
    Does your wife actually want to move?

    Would she want to rent out the property which has so much sentimental value to her?
    • billy2shots
    • By billy2shots 10th Nov 18, 3:44 PM
    • 108 Posts
    • 117 Thanks
    billy2shots
    • #7
    • 10th Nov 18, 3:44 PM
    • #7
    • 10th Nov 18, 3:44 PM
    That's the crux of the issue. I think she likes the idea of moving but panics when push comes to shove.

    With a 6 and 8 year old more space will be needed in the future. My current roof will need replacing in the next 5 years. The master plan was to extend our current place , add in a loft extension (over new rear extension as well) and modernise throughout. £80k-£100k of work. I am saving hard and hoped to be somewhere near in 4 years.
    I'm worried that we will end up with a home too big and expensive for the street meaning we will never see the outlay back when we come to sell. Plus the fact a !!!!!!!ised place is never the same a purpose built home. Which leads to us talking about moving every so often.

    We have a Ltd company of 2 care homes and I manage 1 on a day to day basis. I'm used to landlord certificates, insurance, having people live in the places we own. I'm not sure I want the responsibility for yet another property and the maintenance involved.
    • pinklady21
    • By pinklady21 10th Nov 18, 4:26 PM
    • 803 Posts
    • 588 Thanks
    pinklady21
    • #8
    • 10th Nov 18, 4:26 PM
    • #8
    • 10th Nov 18, 4:26 PM
    If your wife doesn't want to sell it, why do you think she would be happy to let it to someone she doesn't know?
    What will the conversation between you be if the tenants trash the place?
    • billy2shots
    • By billy2shots 10th Nov 18, 7:14 PM
    • 108 Posts
    • 117 Thanks
    billy2shots
    • #9
    • 10th Nov 18, 7:14 PM
    • #9
    • 10th Nov 18, 7:14 PM
    Went to see the house today along with 6 other viewings before and after us. There was an open house last week with a lot of interest apparently. I know it's normal for EAs to exaggerate the demand to tempt bids. This time I believe them because I saw 2 families leave before us and the next couple arrived when we were there.

    My wife is very keen on it as am I, she understands that we would need to sell to make things affordable.
    I have no doubt this house will go before we can get ours on the market and sold.
    We do have an option although I feel guilty with what it involves.

    Plan B

    - put our current home up for sale whilst making an offer on new place.

    - Make an offer and if accepted

    - My dad has offered to loan us £200k (the guilty bit)

    -Take a £250k mortgage which allows overpayment

    - pay the higher rate stamp duty for the second home.

    - move in and then spruce up my current property if I have had no offers.

    - when sold then pay my dad back, overpay a chunk off the mortgage to bring that down, claim the higher rate stamp duty back.

    Looks simple on paper but I'm not sure I need the stress of having a property that might not sell for a while given Brexit and time of the year.
    • Slithery
    • By Slithery 10th Nov 18, 7:23 PM
    • 966 Posts
    • 1,537 Thanks
    Slithery
    - My dad has offered to loan us £200k (the guilty bit)

    -Take a £250k mortgage which allows overpayment .
    Originally posted by billy2shots
    Have you found a mortgage lender that will agree to this?
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