Any advice for having 2 mortgages?

[Limonjelly]

We can't sell our flat for a number of reasons, but mainly because the building needs remedial work that's been delayed for 4 years now. It's been crazy, we're stuck. We're so desperate to move so we can have more space for working from home, and so we can start a family (I'm 36, DP is pushing 40).

We're looking into the feasibility of getting a second mortgage and buying a house, and renting our flat out. Has anyone else done this, how hard is it to do, and what are the cons? Obviously we'll be able to borrow less for a house than we could get if we didnt have a mortgage already. But wondered what other rules, fees and issues we're likely to encounter?

Also rent earnings wise, we'd be lucky to break even, taking into account service charges etc. So we won't be making any money on renting the flat, just about enough to cover costs I think.

You'll first need "consent to let" from your existing mortgage provider. Depending on the equity, they might want to move you to a BTL mortgage.
Check if you need to register as a landlord with your local Council.
You then need landlord insurance, an EPC, gas safety certificate etc.
Would you employ a lettings agency or find a tenant and do the reference and credit checks yourself?
Will you be letting furnished or unfurnished?
Your existing mortgage provider is also the best place to ask about additional borrowing to fund the purchase of your second home. There was possibly something in the budget about reducing the tax on second home ownership. Double check.

You pay tax on rental income and then get relief but only at basic rate-so this impacts on higher rate tax payer and it may well take you into being a higher rate tax payer away.

You also pay 2nd home stamp duty- you can claim it back if you sell the 1st home within 3 years

I think you'll be liable for capital gains tax on the profit of your rental flat if you're not living in it for a period of time. There are complicated rules around the profit divided by the number of years you owned the property with the tax liable on the rented years. Check it out.

I'll look into the tax element, thank you. @Octopuslethargy I didn't know you could claim that extra stamp duty on second homes back, I'll look into that too thank you.

@Limonjelly I was in a similar situation to you. I expect your remediation work is due to cladding issues.

The additional rate stamp duty you pay on the house purchase is refundable if you sell the flat within three years (although delays beyond that caused by cladding issues are usually an exception to the three year rule, and you can apply for a refund provided you sell the flag as soon as possible after remediation has finished).

The lender for the mortgage on your house will do an affordability check. Fortunately our combined salaries covered living costs for both properties even (in the event we couldn’t find a tenant/didn’t get rental income). They will want a full breakdown of the flat costs even though the mortgage relates to the house.

Think about how much rent you’ll likely get during remediation - landlords are being forced to discount rent to compensate for the building works/inconvenience.

Tenants won’t generally look after the flat in the same way you would. Get used to the idea of it being an investment not your home.

FWIW if you can make the numbers work, go for it. My situation was quite stressful, but overall the move and potential to move on with life was well worth it. Good luck!