changing morgage to buy to let

knightowl_3

Hi everybody. My first post. Be gentle please. Here is my question , nobody seems to knw the answer.
I need to move house, due to my daughter going to a new school. I am not willing to sell in the current market, so thought of changing my morgage to a buy to let and then rent my existing house. When I asked the Tax office the lady said, if I lived in the property and then change it to a buy to let, then the interest on morgage is not tax deductable. But she wasn't sure, many attempts to contact a technical assistant failed.

Is that true? Has anybodu gone through similar situation? Any advice is welcome. Many thanks in advance.

knightowl_3

Halifax is offering me a 'consent to lease'. Will the situation be the same?

Pete111

Don't think you can do that as you will still own and reside in the property. HMRC are very unlikely to give you tax relief on the mortgage interest as a landlored if you are the tenant.

If you find you can though let me know and I will ring my bank straight away!

socrates

I think this whole thread is very confsuing

To the OP

Is this right - you are moving OUT of the property and looking to rent it to someone else. In the meantime you are looking to rent somewhere else to be nearer to the school

In this case you need 'consent to let' - this is very different from a BTL mortgage.

If this is correct - now people can answer the question regarding the 'tax issue'

knightowl_3

Thanks pete,
But I am not going to live in here. My plan is to buy another house and live and make my main residence the new house. And then rent this house. If interest is not tax deductable i'll be loosing money!

socrates

knightowl wrote: »

Thanks pete,
But I am not going to live in here. My plan is to buy another house and live and make my main residence the new house. And then rent this house. If interest is not tax deductable i'll be loosing money!

Now you have made it clearer - yes you can claim the interest part of your mortgage (on the one rented out) - perhaps the way you originally explained confused the tax office too.

Speak anonymously to your current lender and see what their view is on 'consent to let' - then come back and ask all the subsequent questions you need to ask.

knightowl_3

Thanks Socrates, for making it simpler. Consent to lease was appealing to me as it maintains my curent morgage and it will pay off the debt. If te tax issue is significant I dont mind goung for a 'buy to let'.

silvercar

If you rent out your house the mortgage interest upto the value of the property when first let is an allowable expense against the rental income. It is not a requirement to have the mortgage secured on the let property and the tax people are not concerned with whether you have consent to let or not.

The important point is the value of the property when first let. It may be prudent to find comparable sold prices off house price websites to validate your claim.

knightowl_3

Current lender [halifax] has no problem in changing it to a consent to lease. But they dont do 'buy to let'. Their finacial advisor has no idea about the tax issue!

socrates

knightowl wrote: »

Thanks Socrates, for making it simpler. Consent to lease was appealing to me as it maintains my curent morgage and it will pay off the debt. If te tax issue is significant I dont mind goung for a 'buy to let'.

Trust me you do not want to go anywhere near a BTL mortgage - at some point you will need to speak to an accountant.

Dithering_Dad

I did this and my mortgage interest was tax deductable. I rented out my house while I worked overseas and I had to fill out an overseas landlord tax return. In your case it'll be easier because you're not moving abroad.

As others have said, try to obtain 'consent to let' permission from yoru current mortgage provider, it'll be cheaper because you won't have to pay remortgaging costs (such as valuation fee and arrangement fee) and your mortgage rate will usually be lower than a BTL mortgage.

Tell your mortgage provider that you think it will be a temporary arrangement and that you'll be looking to sell the house once the market levels out. Otherwise there is a possibility that they will insist on you taking out a more expensive BTL mortgage product.

Make sure that you get Landlords buildings insurance (if you keep your existing insurance and your tenants burn the house down, you won't be able to claim), get your gas and electricity checks and you might also look at getting a management company at first if you are new to being a landlord.

As far as your tax relief is concerned, you are only allowed to claim for the original purchase price of the house. For example, if you bought a house for £38k and then built an extension with an additional mortgage of £25k. You will only be allowed mortgage tax relief on the original £38k mortgage, not for the new £63k mortgage.

Good luck.