Changing to a buy to let rather than selling home

[Emm220884]

Would you sell your house, or keep to rent it out when you move to a new property.

My partner and I are moving to a new house, we were just going to sell. Over the last couple of days we have discussed the possibility of renting out.
The property is valued at £400,000, I've a £68,000 mortgage.
We are buying a new house with and getting a £155,000.

How would this work? When I rented a house out years ago, I just had to prove the rent covered the mortgage, is this still the case?
Thanks

Im looking into this too, are you saying the new house is costing 155k or thats the mortgage?

That would be the mortgage, new house is £575,000.

If you decide to keep it you just have to be mindful of stamp duty, for second properties it can be huge 🙂 otherwise if I was you I probably would let it if I could!

It was a nightmare getting tradesmen over lockdown and still is actually, they are so busy - you might put up with that yourseof but it's a nightmare if it's your let property that needs stuff done. Also the delays - eg 6 weeks for a new boiler .......

My partner is a plumber and electrician. So I am safe ish with that side of things.
Trying to find out out about mortgages etc really

When I did this many years ago, I had to get Consent to Let from my mortgage provider. Please ensure you look into the tax implications before deciding, you are taxed on income not profit as well as capital gains tax when you do sell. During the time I had the property, the rules changed on what was allowable to offset tax as well as CGT also.

Also ensure you understand tenants rights and time taken to potentially get your property back, I had a tenant who stopped paying rent, she could legally stay in the property until I had gone through the courts and had to get bailiffs. Not only did it cost me a huge amount of money but it was not a pleasant experience having to evict someone. This was pre Covid so before the considerable delays now in play.

It is definitely not a passive income!

I'm a couple of years out of date, but I believe 75% ltv is the minimum for a btl mortgage. Will that leave you enough to buy the house you want? Tbh, i think I'd just ring a broker and let them run the numbers. You need to work out the most financially beneficial split between the two mortgages, ie weight them so you pay least interest overall.

Additionally make sure you are aware of all the new landlord regulations.

How much equity do you need to take from the sale or remortgage of your current house in order to be able to afford the new one? A BTL mortgage will not release all the equity as you will be expected to have a deposit on the BTL property.

That's what puts me off. When I did this previously my house was wrecked and I was either paid late or not at all. Then the tenant was a nightmare to get rid of.

It's not my first choice, hopefully I will sell one for the other, but I am awaiting a court hearing as my children are under 18 so they have to give an agreement to sell. Should they not sell, I don't want to be held hostage in my home, so I'm looking at the potential to rent it, but so that I would still own it.
To order does state that I have to live in the house, just that it cannot be sold

Talk to a mortgage advisor about a Let To Buy mortgage

Work out all the outlay and running costs of a rental, and the potential income, leaving a good margin for contingency and void periods.

Factor in the 2nd home stamp duty on your new house, and the fact that future sale of the rental would be subject to Capital Gains Tax. So look, overall, at how much net income you would make, and / or how well it would do as a capital investment.

‘Let to Buy’ is not a typo, by the way, it is a specific type of mortgage designed for your situation.

Are you saying you can have 155k of mortgage and 975k of house?
Or do you need to take some equity out of the current house to fund the next?
How much are the repayments on the current house? And what do you think you can rent it for?

Second stamp duty is a killer. Watch out for CGT tax and set up/management fees.

We did this, mortgage for second house (our actual home) was calculated on our total mortgageable value (the 3/4 times our salary or whatever ratio it was) LESS the outstanding on the existing property. Existing mortgage was then converted to buy to let and we had to prove affordability if no rent.

Was reasonably straightforward.

Use a stamp duty calculator to see if the SDLT a will be affordable for you.

I wouldn’t recommend getting into buy to let now. The new regulations regarding evictions are strict, you won’t just be able to issue a s.21 if you want it back.

Is the house up to ‘Decent Homes Standard’?

Typically you will need at least 25% - 35% equity in the property to access buy to let mortgages- or if it’s on an existing residential mortgage you may be able to get consent to let.

The rules and regulations are heavily weighted in favour of tenants. The previous poster is correct that you can no longer deduct finance costs when calculating income, which can inadvertently push you into a higher tax bracket. From 2024 landlords with an income of £10k + per annum (so £850 + pcm) will need to comply with Making Tax Digital and submit quarterly returns. There’s also changes to S21, ensuring that the property is minimum EPC rating of C from 2025(?). Plus goodness knows what else the powers that be will introduce. They are driving out small private landlords continuously.

I wouldn’t do it unless I didn’t have a choice.

Thank you all for your advice.

I'm really hoping that this will not have to be an option. I will have a look at all the advice you've given over the weekend and hopefully be able to decide whether it would work for us should we need to take this option in the future