Consolidating mortgages on buy to let properties

[vodkawoman1]

Hi - I need to remortgage two mortgages on two buy to let properties but I can just about manage to consolidate them into one mortgage (therefore saving one arrangement fee, valuation, legal fee - quite a saving). Does anyone know if there is any reason (tax wise) whereby this may not be beneficial to me. Thanks for any advice.

[mad_maz]

Hi

Can I suggest that you contact Peter Shepherd at The Money Centre on 01494 895425. I discovered the Money Centre by searching on Google and cannot recommend them highly enough. Peter will advise you on how to go about this and what products are available.

Thanks

Marion

[russ295]

i have used the money centre a few times lately, and although they charge a generous fee, on the the over all cost the were the cheapest and so hassle free!

russ

[Selkirk]

I am sure you can source your own mortgages, I personally wouldn't pay a broker fee - there are plenty who don't charge it.

I would suggest that all the upfront expenses like solicitor fees and valuations are deductable from profits but there is a very good tax person who will no doubt put you straight on that shortly. Personally I would maximise both mortgages as you get tax relief on the interest only payments and prehaps pay off your residential (no tax relief) or invest it elsewhere (ISA's are tax free), however, I don't know your circumstances or your future intentions.

cheers

[plym77]

Hi Vodkawoman

I am (I think!) the tax person Selkirk is talking about

Each persons circumstanace are individual and therefore I can only provide you with the basics in a general scenario at this stage.

When you remortgage I would claim your valuation fees etc as expenses.

With regard to allowing mortgage interest. I have detailed this subject a number of times and it seems to be one that comes up again and again. If you search 'mortgage interest' on this forum you will see several posts I have made on the subject.

To clarify- you can mortgage a buy to let property and claim tax relief on the interest up to the value of the property at introduction to the letting business. So if that was at purchase, it is your purchase price, but if it was previously your PPR, then it is the value at the date the property was introduced to the letting business.

The loan secured on the BTL can be used for any purpose, whether home improvements or buying a sports car even! The reason is that you can extract money from the capital introcuded (ie. the BTL property).

Interest Relief can be claimed on the propertion of the loan up to the value at intro

an example. You buy a house in 1990 as your PPR for £100k, you introduce it as a BTL in 2000 and it is worth £200k. In 2007 it is worth £250k. You can mortgage the property and claim interest relief on a loan up to £200k. If you take a mortgage for say £220k, then you can claim mortgage interest relief on the £200k up to the point that the whole loan starts to drop below £200k (for example, if you have a repayment mortgage). The BTL qualifying interest forms the top slice of the loan, and therefore any repayment will pay off the non-qualifying part of the loan first.

For a higher rate taxpayer for example paying 6% interest, the rate after tax relief is just 3.6% - most people can get a higher rate of return for their money than this and so this really is a key area for consideration.

You can also secure BTL finance against your own home, but the structuring of this and what you use the money for has to be considered more carefully to ensure you are not jepordising your tax relief. This is a more specific area and difficult to be general in, but in basic principals it can work and often people can get better rates on their home. I must stress that this should be done with guidance from a tax adviser.

I hope this is helpful. If you would like specific advise feel free to contact me to discuss this further.

Regards

Sherena Glanton CTA

sherena.glanton@target-accountants.com

Direct line 01225 486 359