zak100 Posted July 16, 2011 Report Share Posted July 16, 2011 Hi. I wanted to know if this is idea is viable. To remorgage the property i live in to obtain £150,000; then purchase another property and rent it out, without the need for a buy to let mortgage, as the property rented would have been bought out. The property the mortgage would be for is where I reside. This would save me upto 2.5% interest on the loan. Thanks Link to comment Share on other sites More sharing options...
Carryon Regardless Posted July 16, 2011 Report Share Posted July 16, 2011 It's not a loop hole your scenario is quite common. It may be that the mortgage company will require to know what the funds are intended for, but if they are willing to release the cash it's your choice to invest it in btl. Link to comment Share on other sites More sharing options...
Richlist Posted July 16, 2011 Report Share Posted July 16, 2011 .......and the interest payments (only) on the mortgage raised against your residential property in order to purchase the investment property can be offset against rental income to reduce your income tax bill. Whats important for tax purposes is not the security for the loan but the purpose of the loan. Link to comment Share on other sites More sharing options...
Melboy Posted July 16, 2011 Report Share Posted July 16, 2011 In today's tight-fisted mortgage market you would have to have a lot of equity before any mortgage supplier gives you your £150,000. I also think that they would just assume you were about to purchase another property or a Sunseeker boat of course. As COR has mentioned once you have passed through all their loops you can spend the money on what you like. I would be interested to know how you get on so please come back to us. Mel. Link to comment Share on other sites More sharing options...
Carryon Regardless Posted July 16, 2011 Report Share Posted July 16, 2011 RL makes a good point, it's the purpose of the loan that makes claiming the interest possible with IR. I had this discussion with my son in law accountant, who believed my home mortgage wasn't tax allowable. Demonstrating the purpose of the loan could be an issue if challenged. My view is that if the equity of the btl's could repay the home mortgage then the only purpose of the home mortgage is to fund the btl ownership. Mr tax man may not see that one as so clear cut. If raising extra capital by equity release of your home then demonstrating that the funds were used to buy a btl shouldn't be difficult. From the start it's worth considering the documentation that may be required to justify the tax relief claim. Link to comment Share on other sites More sharing options...
Antnkel Posted July 16, 2011 Report Share Posted July 16, 2011 If you were to remortgage your house to finance a deposit for a btl would the "tax deductible amount" be worked on the extra you pay onto top of the existing mortgage. I.e - A mortgage of say £110,000 at 3% would be £526/month then if you borrowed another £30,000 for a btl deposit and the interest went up on the new mortgage to say 4% you'd be paying £746 insead of £669.99 if it was still at 3% Which figure would deductible tax be worked on? Link to comment Share on other sites More sharing options...
Richlist Posted July 16, 2011 Report Share Posted July 16, 2011 You can only claim the interest payments made on a loan to buy an investment property NOT any capital repayment element of that loan. If you were to remortgage your house to finance a deposit for a btl would the "tax deductible amount" be worked on the extra you pay onto top of the existing mortgage. I.e - A mortgage of say £110,000 at 3% would be £526/month No, the interest on a £110,000 mortgage at 3% would be £275 per month..... then if you borrowed another £30,000 for a btl deposit and the interest went up on the new mortgage to say 4% you'd be paying £746 insead of £669.99 if it was still at 3% Which figure would deductible tax be worked on? The answer is £30,000 @ 4% = £100 per month BUT, I wouldn't recommend that you borrowed the deposit AND the balance of the purchase price. It might mean you would be paying less tax because the repayments would seriously reduce any profits. No profit = bad business. Link to comment Share on other sites More sharing options...
Antnkel Posted July 16, 2011 Report Share Posted July 16, 2011 Yeah forgot about the capital part, so I could claim the interest part at the higher rate. The figures were only an example, the profit would be enough just wanted to maximize the possible tax deductions. Link to comment Share on other sites More sharing options...
zoreh Posted June 27, 2013 Report Share Posted June 27, 2013 Hi, I am new this site and this is my first post. I hope I am in the right place to post my question. I am raising £120,000 equity against my home (interest only mortgage) and I am planning to use this and £50,000 deposit to purchase a£170,000 B2L property in joint name for myself and two grown up children. The mortgage will be just in my name, but the B2L will belong to all 3 of us. Am I correct to assume that the profit (rent minus interests payments and other costs) will be equally shared between the 3 of us for self assessment purpose? Could the income be shared at different proportions? Link to comment Share on other sites More sharing options...
Melboy Posted June 27, 2013 Report Share Posted June 27, 2013 If the mortgage is only in your name then only you can claim back the interest paid on that mortgage through HMRC. You can have all 3 of you on the title deeds but your mortgage provider will want to know this information and your insurance company as well. You would need to seek legal advice from your Sol. because mortgage companies and insurance companies have really tightened up this means of purchase and interest only mortgages are much harder to obtain these days as your mortgage provider will want to know how you intend to pay off that mortgage at the end of it's term. They will not accept property rise and inflation over 25 years either as the means of paying off. Link to comment Share on other sites More sharing options...
zoreh Posted July 10, 2013 Report Share Posted July 10, 2013 Hi Melboy, Thank you for your advice. I am contacting a taxation solicitor today. I will post my finding here. Link to comment Share on other sites More sharing options...
Richlist Posted July 10, 2013 Report Share Posted July 10, 2013 Nearly all mortgage lenders allow X2 names on the mortgage.......there are far fewer lenders that allow 3 or 4. So, you would be limiting mortgage availablity by going for more than X2 people. Link to comment Share on other sites More sharing options...
zoreh Posted July 11, 2013 Report Share Posted July 11, 2013 If the mortgage is only in your name then only you can claim back the interest paid on that mortgage through HMRC. You can have all 3 of you on the title deeds but your mortgage provider will want to know this information and your insurance company as well. You would need to seek legal advice from your Sol. because mortgage companies and insurance companies have really tightened up this means of purchase and interest only mortgages are much harder to obtain these days as your mortgage provider will want to know how you intend to pay off that mortgage at the end of it's term. They will not accept property rise and inflation over 25 years either as the means of paying off. I have now spoken to a tax advisor. If the interests is paid by all 3 of us then we can all offset the cost of the interest equally. Good outcome. Link to comment Share on other sites More sharing options...
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