Let to buy - mortgages and tax
Discussion
Two part question as I figured mortgages and tax are different things..
Our home has been valued at just north of £500k and we have a £240k residential mortgage. We're looking to upsize and our options are:
1) Sell our property and spend another £100k in the same area for a bigger house
2) Sell our property and buy a bigger place in an area (walking distance) from where we are
3) Keep current place (rent) and buy a bigger place in an area (walking distance) from where we are (generated an income, slightly less affluent area)
The first two feel fairly simple, but option three only really came to use over the weekend. We've instructed a selling agent to get our property 'brochure ready' for sale, but they mentioned how it's not only the housing market but also the rental market in our area which has seen huge demand. Our property would rent for £1800-£1900 per month (which is backed up by the speed of rightmove rental adds disappearing), and we can secure a 5 year fixed BTL mortgage at 1.75% - or £350 per month on the above borrowings.
We have savings to put down a deposit on a new property of similar value (which would mean the slightly less affluent area), though we'd need to find a further £100k. I understand our options are to either take equity out of current property (which would mean a less attractive BTL rate), or extend the residential mortgage borrowings. We're mid way through a fixed mortgage, but our lender might bridge the other £100k.
Is there a general rule on whether it's better to have exposure on the BTL or your main residence? Feels obvious when asking out loud, but this also leads into the tax questions..
The numbers seem to cost in as is, but I'm a 40% tax payer and the missus (unmarried, for now) is 20% so assume a blended tax of 30%. We own the property 50/50, but am I right in thinking there's a method for the 'benefit' to be geared towards the missus, assuming she actually takes care of the business side of the rental and monies etc only going into her account (and I retain 50% ownership of equity as it would be mad otherwise). It would make around £2k per year difference so something I think needs exploring.
Our home has been valued at just north of £500k and we have a £240k residential mortgage. We're looking to upsize and our options are:
1) Sell our property and spend another £100k in the same area for a bigger house
2) Sell our property and buy a bigger place in an area (walking distance) from where we are
3) Keep current place (rent) and buy a bigger place in an area (walking distance) from where we are (generated an income, slightly less affluent area)
The first two feel fairly simple, but option three only really came to use over the weekend. We've instructed a selling agent to get our property 'brochure ready' for sale, but they mentioned how it's not only the housing market but also the rental market in our area which has seen huge demand. Our property would rent for £1800-£1900 per month (which is backed up by the speed of rightmove rental adds disappearing), and we can secure a 5 year fixed BTL mortgage at 1.75% - or £350 per month on the above borrowings.
We have savings to put down a deposit on a new property of similar value (which would mean the slightly less affluent area), though we'd need to find a further £100k. I understand our options are to either take equity out of current property (which would mean a less attractive BTL rate), or extend the residential mortgage borrowings. We're mid way through a fixed mortgage, but our lender might bridge the other £100k.
Is there a general rule on whether it's better to have exposure on the BTL or your main residence? Feels obvious when asking out loud, but this also leads into the tax questions..
The numbers seem to cost in as is, but I'm a 40% tax payer and the missus (unmarried, for now) is 20% so assume a blended tax of 30%. We own the property 50/50, but am I right in thinking there's a method for the 'benefit' to be geared towards the missus, assuming she actually takes care of the business side of the rental and monies etc only going into her account (and I retain 50% ownership of equity as it would be mad otherwise). It would make around £2k per year difference so something I think needs exploring.
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