buying a property to let - add to our existing mortgage??

[mckenzie]

How does it work can anyone tell me please?

Our current home is worth approx £700k and we have a £250k mortgage outstanding. We are looking to buy a property for approx £350k to rent out as an investment.

Do we have to go to our current lender and have the extra borrowing added to our current mortgage? Or can we shop around and have another completely separate mortgage on the new property? We do have some cash to use for the purchase/deposit.

Thanks in advance for any helpful advise.

The mortgage usually has to be specific to the property... i.e you can't borrow against property A to buy property B. Buy to let mortgages are also classed differently by lenders than borrowing for a home. Your exsisting lender will have a product but it pays to shop around. Independent mortgage advisors are useful.

You can do either.
Then option that works out best for you will depend on your circumstances.

If you have both properties secured on one mortgage then they will count it as you having 600K borrowing on 1050K, which might mean better interest rates.

thanks very much. Guess first stop then is current lender and see what they offer. and then go shop for comparisons.

I like shopping but i don't think this shopping will be quite as enjoyable

Get some advice from the tax point of view for were you to have a mortgage on the buy to let then your profit would be less on the rent and so the tax you would have to pay would be less.

thanks BGD. I was just going to go onto Money Saving Expert.com and see if they have an idiots guide to buying to let maybe. Or perhaps I'll be able to get a book from the library?? DH has said he thought we'd just look at flats but i've been given details of very rentable houses from one estate agent today so we also need to look at the pros and cons of different property types. That, I guess, might be personal though.

it would be madness not to get a seperate mortgage for the let property purely for tax reasons.

You will not be able to offset interest paid on the mortgage against the rent earned, and will end up paying tax on all the rent unnecessarily if you run it off your residential mortgage.

Also are you sure that a property worth 350k will get you enough rent to pay the mortgage?

thanks herhonesty for that. We're not sure yet if the £350k range of properties will work yet as rental - it's very early days and I'm doing the research just now.

I'm looking at all possibilities from 2 bed flats right on top of the station to 3 bed houses in a much sought after road, close to a different station in a slightly 'nicer' area.

We want to do this for long term investment return though so my prime concern is that it is very rentable and so the chance of it being empty will be extremely low, rather than getting a top rental income for monthly return.

ok. as a general rule (and obviously i dont know what area you are looking at) houses are less rentable than flats unless you are in a student area.

As others have said, you can do either

1. Remortgage your current home - you will find this less hassle, and the interest rates will be cheaper

1. Get a buy-to-let mortgage - the advantage of this is that interest will be deductible against your rental income

BTL mortgages now require a significant deposit - I've been told around 25% now.

thanks guys.
I'd heard that HH but we seem to have an abundance of flats here. Dh wants to go for a flat as he thinks it will be less hassle (managing agent etc) whereas I think a house so that we are independent and do not have to rely on any third parties to sort out issues (I've owned a flat in the past, DH hasn't. Perhaps that is affecting our view).

You also need to consider that you can not guarantee 100% occupancy. Supposing you can't find a tenant, are you going to be able to pay the extra mortgage without the rental income coming in. Or what happens if your tenant stops paying the rent, you still have to pay the mortgage. I don't meen to be a scaremonger, but getting in to BTL you need to be aware of the pitfalls as well as the benefits.