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Hi Guys, I am considering going into BTL business. I have a property which we live in at the moment (valued at 216K for now) and in about 4years from now the mortgage left on it will be about 30K or there about. Presently outstanding mortgage is 80K. My plan was to pay off the mortgage and then let out the property and buy another one to live in. however I am beginning to think that there must be a faster way to do it rather than waiting to pay off the mortgage before buying another one. I guess if the present property become mortgage free then i will not have to get a BTL mortgage on it and also I may not necessarily need to set up a limited company to make having BTL properties tax efficient. do i need to set up a limited company before starting this? how would you advice i proceed. I am asking for a strategy to start off in BTL if you were in my position. I have at least 35K cash as well. Will you also advice interest only mortgage or repayment mortgage. I will like as much advice as possible. thank you all.
The way to start is to release equity in your existing home. If you are going to move elsewhere and let the current home out it is called a let to buy mortgage. If you will continue to live there then it is just a residential mortgage. I would also suggest that you borrow on the buy to let as it will firstly release funds and secondly force the various involved parties to consider whether this is a sensible buy to let (which is more due diligence and comfort for you as a new entrant to the market). So in short you are remortgaging the current property and borrowing on the new. The more you borrow on the BTL the more you can get on interest only . It is unlikely that your home will be anything other than repayment.
On whether to go for interest only or not, I would suggest that you do (many will disagree understandably). The reason is that as you are new to the market there may be things you have not considered and so some additional cashflow might be important. However I would say that it is advisable to reduce your borrowings in general. You should look at your tax position (and any ERC's) and repay the most expensive mortgage first (BTL or residential).
You have then asked lots of tax questions and you have not given enough information for this to be answered properly. People will give you their view but it cannot incorporate your circumstances without more advice. I suggest you seek professional advice.
Chartered Accountant, Tax Advisor and Mortgage broker
(and BTL portfolio owner)