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Comments
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ignore all the above - ask your lender ...........
who'll say no!
No, I'm not phycic, it's just common sense. All banks are trying to reduce high risk lending, with this being a prime example.Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.0 -
Thanks for all your comments.
Silvercar/Others - you mentioned "Mortgage interest is an allowable expense wherever it is secured". This is not something I was aware off, so in another way of saying this you can rent a property with no mortgage and claim the interest of a mortgage with a mortgage that you live in??0 -
whiskywhisky wrote: »Thanks for all your comments.
Silvercar/Others - you mentioned "Mortgage interest is an allowable expense wherever it is secured". This is not something I was aware off, so in another way of saying this you can rent a property with no mortgage and claim the interest of a mortgage with a mortgage that you live in??
Have a look on the tax board for threads about this, it has been discussed at length.
You could imagine it as the revenue accepting that if you hadn't bought the rented-out property you would be able to reduce the mortgage on your residential home.
The average BTLer has less than 5 properties and is in their mid 40s. A lot of people in this situation may have little or no mortgage on their main home and borrow against this to secure funds for a BTL. The mortgage deals are cheaper and easier to obtain if you take them out on your home rather than the let property. Which ever way you do it, it is the interest on borrowed money on value of the property at the time it was first let that is an allowable expense. You could actually take an unsecured loan if you wanted.
For a lot of small time leters, there will be a BTL mortgage on the let property and the deposit raised by part of the mortgage on the main home.I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
I am trying to port my motgage to a new home, worth slightly more than mine, a good amount more than I have remaining on my balance anyway. There is no ERC payable on this portable mortgage.
They gave us a new mortgage reference number, changed our address on the application to the property where my parents live (a church house obviously not owned by them) as that is where I am receiving my post but am not registered there in any way.
The bank looked into it with their underwriters and we just got a standard letter stating our 'application for a mortgage was declined' - is it possible that they have not linked our current mortgage with this and have treated it as a new application rather than a porting request?
They said there was likely to be no problem with it, and our credit ratings are exactly as they were when we took on the motgage 2 years ago (actually my OH's is better) and we are both earning more.
I actually vomited when I got the letter!! My OH is trying to sort this with them today but I wondered if anyone else had come across this, thanks0 -
You said "don't ask why" so I won't, but:
If your reasoning is to claim the mortgage interest as an allowable expense against rental income, you don't need to move the mortgage. Mortgage interest is an allowable expense wherever it is secured.
I'd like to know your source for this.
Everyone I have spoken to claims it is completey false. How can it be right?
The more I think about this, it is wrong -
When we had MIRAS, any rented property was not entitled to MIRAS relief.
If this assertion is true then no one would ever pay tax on rental income and that is clearly not the case.
Do not assume this to be fact until proper evidence is posted.0 -
MIRAS was always for residential properties and nothing to do with the business of letting. You have to think of the let property as a business, so the business has a capital account which is the amount invested in the business and there is a loan, if someone wants to withdraw their money from the capital account the interest on the money is allowable; where, or even if, it is secured is not relevant.
BIM45700 is relevant, in particular, "Proprietors of businesses are entitled to withdraw their capital from the business, even though substitute funding then has to be provided by interest bearing loans."
There is not restriction in place that requires the loan to be secured on the property that is the letting business. In the non- letting context, plenty of people take out loans secured on their homes to fund their businesses, this is no different.
The best advice is to see an accountant.
To give you a more common example, an owner occupier decides to do a BTL. They increase their residential mortgage to fund the deposit and take out a BTL mortgage on the property. The interest on the BTL mortgage and the interest on the increase in the residential mortgage would both be allowable expenditure.
This has been discussed on landlord forums and tax forums, but you could look at the tax board here, where tax inspectors do visit.I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
Direct quote from ricky (a landlord site):
"2) Claim All Your Mortgage Interest!Remember to claim all the mortgage interest from your buy-to-let properties. Contrary to popular belief, it does not matter which property the loan is secured against. If you re-mortgage your home for £25,000 and use the money as a deposit on a buy-to-let flat, you can claim all the interest as a tax deduction. What matters is how you use the money, not where it comes from."
Source:
http://www.riky.co.uk/more_info.asp?current_id=346I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
Silvercar is correct. I do exactly this, offsetting my residential mortgage interest (not capital) payments against income from other properties.
You can do the same for any investment or business revenue, for example if you borrow against your homw to invest in company shares, the interst cost is deducted from the dividend income.0 -
Direct quote from ricky (a landlord site):
"2) Claim All Your Mortgage Interest!Remember to claim all the mortgage interest from your buy-to-let properties. Contrary to popular belief, it does not matter which property the loan is secured against. If you re-mortgage your home for £25,000 and use the money as a deposit on a buy-to-let flat, you can claim all the interest as a tax deduction. What matters is how you use the money, not where it comes from."
Source:
http://www.riky.co.uk/more_info.asp?current_id=346
That's nothing like the same thing - you can only use the portion used for deposit to offset. You can't use the lot!!
I'd be very careful about a liability to capital gains on the portion of the value of the primary residence used to secure an advance for a deposit.
This is a very dangerous game.0 -
Silvercar is correct. I do exactly this, offsetting my residential mortgage interest (not capital) payments against income from other properties.
You can do the same for any investment or business revenue, for example if you borrow against your homw to invest in company shares, the interst cost is deducted from the dividend income.
The second bit is OK
Sorry, now I've spoken to someone who really does know their stuff, this is completely wrong.
Next you will be saying that because I put down £50K deposit on a BTL that I can claim loss of savings interest as an allowable expense.
Yes, you could borrow against your principal residence for a deposit, and possibly claim an allowance, but what about capital gains on your "investment" when you come to sell?
I don't think I'll be too greedy thanks.0
This discussion has been closed.
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