I would really appreciate it if someone could offer some advice.
I own and live in property "A" worth about 160k. This property was purchased
3 years ago for cash, part of which was a 40k loan from my father which I have been paying off on a 10 year schedule at 5% simple interest per annum. My dad has a registered charge on property A, and the amount outstanding is about 30k.I wish to purchase property "B" for about 200k and ultimately live in property B while renting out property A (max likely rental income about 1000 per month.)
I do not have any savings and my mortgage broker initially was looking at a
100% interest-only mortgage to purchase property B, although he has since suggested remortgaging property A to at least raise a deposit for property B, so avoiding extortionate MIP on property B, and to get me a better rate. I think this is basically sound advice.I am confused though as to the position regarding the offsetting of my future rental income from property A against my mortgage interest. How much of my mortgage interest could I offset against rental income? Would it be affected if I remortgaged a higher value of property A and took a lower mortgage to buy property B?
Also, would it be good to take this opportunity to pay off my outstanding debt to my father? He is 75 years old and I am his beneficiary in his will, so to be blunt I would receive that lump sum back again sooner or later. "Re-paying" him the outsanding 30k via the remortgage would reduce my monthly outgoings by about 200, if I have my figures right.
Thanks for any advice.
Ed