Buying a new house - letting out the old

[Sugar Ray]

Hi I am in the process of buying a new house, but am keeping my current flat and letting it out. The flat does not have a morgage so is it best to take one out on that aswell- more tax efficient?

[Postdog]

OK, I'm dumb - you own it! Why take out a mortgage on a place you own, and forget about tax, what about the interest you'll pay?.

By all means hang on to it, rent it out, and if you need to, borrow against it to fund any improvements on your house.

[kags]

Any interest you pay on a loan for a let property attracts tax relief against the rents received, whereas the interest you pay on the mortgage for your main residence does not. The rate of interest you pay on a loan for the let property may however be greater than a straight-forward home loan. It's a question therefore of structuring your borrowing to best meet your needs, but borrowing more than you need just to get the tax relief is not advisable - you will only get 22% or 40% of the interest back via tax relief.

[dans1977uk]

kags is pretty much spot on. There are some great "Buy-To-Let" mortgage deals on the market at the moment but unless you have a really strong dislike for Gordon Brown and don't want to pay any tax it's probably not worth getting a mortgage on the flat.

The other thing is think about how much deposit you have for the new house, if you have little or no deposit you may find taking a small "Fees Free" remortgage on the flat could give you a big deposit significantly reducing the interest rate on your main mortgage.

If you have no historic credit problems don't pay over 5.25% for a BTL mortgage - perhaps try BM Solutions (part of Halifax) or Platform Home Loans (Part of Brittania) if you decide to take a mortgage on the flat.