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Thoughts on arranging mortgages for own home and BTL.

Amounts below are for example only, but I presume wont make any difference to the actual recommendation.

lets say I have a flexible mortgage of 50k. I also wish to buy a BTL property , cost 200k I also have a lump sum of 150k.

here are my thoughts.... pay off mortgage except for 1, (so I still have the mortgage). use remaining 100k of lump sum, plus new loan of 100k on the original mortgage, to buy BTL property.

reason for doing it this way is that now all the interest payable can be shown to be against the BTL property (rather than complexity of some is my house, some is the BTL) and this is offset against the BTL expenses, plus I dont have to take out a BTL loan at a higher interest rate.

is this a good plan? (lets leave out discussion on the merits of BTL and HPCs etc please, its being done to house a relative not to start a property empire.)

Reply to
Tumbleweed
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Can you do that then - buy a property you intend to let with your own existing mortgage account?

Wouldn't you have to declare at some point that you are using the funds to buy another (ie non-primary abode) property - which is something that either your mortgage lender may have a problem with (ie they would be missing out on screwing you over with a BTL mortage as you've said, at a higher rate, so I'm sure it'd be in their T&Cs to prevent you from doing so) or which isn't legal in some respect anyway?

Maybe I've got it all wrong though and would stand corrected if someone else can explain so!

Reply to
<nospam

No, I have a cheque book for that account and can write a cheque and use it for anything I want, another house,a yacht, holidays, ipods, whatever, its my responsibility to make sure that I can repay it, and there is a limit to what I can withdraw, which is factored on the value of my house, and also my earnings.

No different to the 'One' type of account where you can take money out up to your agreed 'overdraft' limit.

Reply to
Tumbleweed

Of course you can. Whyever not?

No, their main concern is that the loan is secured on a suitable property. A property which is occupied by its owner will be more suitable than one which is occupied by strangers who have no ownership interest, because the lender knows (well, presumes) that you will look after it better than tenants.

Doing this kind of thing is perfectly OK, although lenders tend to limit "any purpose" lending to a certain fraction of the value of the property on which it is secured (80%, say) and will only lend more if it's for an approved purpose like improving or extending the home on which the loan is secured.

It's not very common to borrow *all* that one needs to borrow using a mortgage secured on another property. It's more common for an owner occupier to buy a letting property using a max 80% BTL mortgage and to borrow the 20% deposit on their home mortgage.

Why would it be illegal? From a tax angle it's fine to count mortgage loan interest as an expense to be deducted from rental income, even if the loan is not secured against the rental property, provided the

*purpose* of the loan was to buy the rental property.
Reply to
Ronald Raygun

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