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  1. #241

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    Quote Originally Posted by Triggaaar View Post
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    As explained above, it's not worked out like that.

    4 times your personal income is used for you home, because you also have to use your income to pay for everything else in life - council tax, gas/elec, water, food, car, clothes, etc etc. With a rental property, the rental income has to cover the mortgage and it doesn't need to do much more than that. So companies used to ask for rental income to cover 125% of the mortgage, allowing for interest rate rises. The last btl I bought cost 325k, and I got a 275k mortgage for it.
    So you put down 50K,and the rent covered the mortagage payments.Sorry but I don't get why they lent you 275K? Is it connected to for example
    to how much capital you have in other properties? Otherwise you raised it based on your employment earnings?

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    • #242
      Resident pedant Triggaaar's Avatar
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      Quote Originally Posted by Renegade1 View Post
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      So you put down 50K,and the rent covered the mortagage payments.Sorry but I don't get why they lent you 275K? Is it connected to for example to how much capital you have in other properties? Otherwise you raised it based on your employment earnings?
      No, not linked to other properties, and not linked to my earnings. The rent was something like £1,200 a month, the mortgage was less than £1k (interest only). That's all they needed.
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    • #243

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      Thanks for clarifying. Much appreciated.
    • #244
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      Quote Originally Posted by Weststander View Post
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      The latter is true - your salary would still receive the full personal income tax allowance, so your net pay wouldn't fall.
      True in the first year, but net pay deductions are managed by your PAYE Tax Code. When you have an additional income [e.g. BTL] HMRC will ask you to do annual Self Assessments. After you've done this once, the following year HMRC will know there is untaxed income [profits from BTL] so will adjust your PAYE coding to make your tax payment smoother.

      Let's try and keep it simple with an example: You have a £25k job with usual PAYE and for 2017/18 your tax free allowance if £1,150 so you get a tax code of 1150L. If you submit a SA which shows e.g. £3k for BTL profit [untaxed] they will demand the £600 PAYE shortfall and adjust your PAYE coding for 2018/19 to 850L. The affect of this will mean that you won't pay any more PAYE [in total] than you would have done anyway, just that they will deduct more from your pay packet each week / month so that you don't get a £600 SA shortfall to pay later. Helps smooth cash-flow and avoids finding the £600 in one lump.

      The above is a rough example and there may well be other factors to consider in the full and proper calculation - just trying to illustrate how HMRC deduct PAYE in a BTL situation will impact take home pay [eventually].
    • #245

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      Quote Originally Posted by Triggaaar View Post
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      No, not linked to other properties, and not linked to my earnings. The rent was something like £1,200 a month, the mortgage was less than £1k (interest only). That's all they needed.
      Very interesting.

      So basically so long as you have a deposit of at least 25% and the rent will cover the interest only mortgage you can pretty much borrow for as many properties as you want?

      If you for example had 100K, would you use that for a deposit for one property or go for 2 or even 3?

      Is there any relevance to the capital you have in your own home?does it help?
    • #246
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      Quote Originally Posted by Renegade1 View Post
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      Very interesting.

      So basically so long as you have a deposit of at least 25% and the rent will cover the interest only mortgage you can pretty much borrow for as many properties as you want?

      If you for example had 100K, would you use that for a deposit for one property or go for 2 or even 3?

      Is there any relevance to the capital you have in your own home?does it help?
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    • #247

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      Quote Originally Posted by Uncle Spielberg View Post
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      No this is not correct
      How does it work then?
    • #248
      Not actually Dale Jasper Dale Jasper's Avatar
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      Quote Originally Posted by Beach Seagull View Post
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      Thanks for this although the reply above from Dale Jasper contradicts this?
      As I understand it and how it's worked for me.

      Say you get paid 40k.

      You would be taxed - 0% on personal allowance and 20% for the rest .

      If you made a further 10k in profit from rental income (with allowable expenses factored in) , you would be taxed on the 5k above the 45k limit (for 20%) at 40%.

      Not sure if this answer your question (and I'm a media tart not an accountant) but I'm sure you will agree it is fascinating stuff
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    • #249
      Members Uncle Spielberg's Avatar
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      Quote Originally Posted by Renegade1 View Post
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      How does it work then?
      The lending is based on the rental income on the property
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    • #250

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      Quote Originally Posted by Uncle Spielberg View Post
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      The lending is based on the rental income on the property
      Hopefully Triggaaar will explain how he was able to borrow 275K.

      If we took an average 2 bed flat at £900 per month then that's only a £43.200 mortgage if you times it by 4.
      I assume this is what you meant and it's 4 x yearly rent paid?

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