Property finance options

[rufusgti]

Hi. Just looking for some advice on how others would finance property in my situation. I'm looking for repayment options only. And am looking for the best way of doing it from a tax and mortgage rate angle. Also anything I've missed that I need to consider.

I have two properties that I have 60% equity in each with Two separate mortgages. One house we live in, the other is rented out. I want to buy another property to rent out and have a 15% deposit. The house will need work doing that could cost up to 10-15k,which I wont have if I use my deposit.

I'm pretty sure I can't get a mortgage with no deposit but can I use some equity in one of the houses as a deposit? Is that something that is easily available and is it a riskier option?
The same outcome would be using my deposit to purchase then drawing money against existing property to pay for the work. Which is the more straight forward.

What are the tax implications of this. I presume increasing the mortgage on the existing rental property works to my advantage, but is that legal.

[Sarnie]

You will need more than a 15% deposit for the BTL purchase unless you enjoy eye watering rates & extortionate fees (circa 2-3% of the advance)

If you have two properties with 60% equity in them why not re-mortgage one of them and raise funds to increase your deposit to a sensible rate (circa 25%) and also to complete the work. You will get better rates by doing this against your residential property than the current BTL but it depends how comfortable you are doing that. Which ever property you chose, it's perfectly legal as long as it fits the lenders criteria and affordability requirements..

[pacoryan]

And (cue Eric) if the raised capital is easily connected to the purchase of the investment property you should be able to offset the interest on the further advance as well as the BTL mortgage.

Expenditure on improvements is different though and the tax treatment will depend on the specifc of the expenditure.