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mortgage question
alexis2010
Posts: 2 Newbie
I have a query that I wanted some advice to -I have searched the forum but could not see similar problem..........
My retired parents are about to buy a house (an offer has been accepted) and they can pay for the house outright without selling their current house (they are cash buyers). When they leave their current house they want to give it to me so that I can let it for rental income (it's their gift to me). I already have another mortgage. They have suggested that I take a small mortgage out and effectively buy the property from them as there will be some tax break in the mortgage interest I will pay when I buy-to-let. Would it be better if my parents bought the new house outright and then transferred the deeds of the old house to my name and then I could let out the property? So I guess my question is: Is it worth me taking a mortgage out for the tax breaks for when I buy-to-let? Any thoughts appreciated!
Alexis
My retired parents are about to buy a house (an offer has been accepted) and they can pay for the house outright without selling their current house (they are cash buyers). When they leave their current house they want to give it to me so that I can let it for rental income (it's their gift to me). I already have another mortgage. They have suggested that I take a small mortgage out and effectively buy the property from them as there will be some tax break in the mortgage interest I will pay when I buy-to-let. Would it be better if my parents bought the new house outright and then transferred the deeds of the old house to my name and then I could let out the property? So I guess my question is: Is it worth me taking a mortgage out for the tax breaks for when I buy-to-let? Any thoughts appreciated!
Alexis
0
Comments
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You should read BIM 45700. If you struggle to understand the explanations in there, you are best off seeking an accountants view on the matter.
For a loan to be deductible against your rental business' income, you need to look at the purpose of the loan. i.e. You couldn't be gifted the house and offset your home mortgage interest against the profits as the purpose of the home loan was originally for your personal circumstances, and not those to do with your rental business.
If you are gifted the house, and you take out a loan against the house you will be able to claim the interest against your rental profits. BUT, if you have no plans for the cash that you get from taking out the loan, then you are worse off, even with the tax break as you are paying interest costs. If you will utilise the cash for something else, then it may be worth it.
Sometimes it is easy to focus on getting the best tax outcome, without thinking logically about subsequent increases in your fixed cost base.I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.
That also means I cannot share in any profits from any decisions made!;)0 -
Read the 7 year rule on IHT. As there are potential issues if the property is gifted to you.
Also "deprivation" of assets may come into play depending upon benefits received by your parents in the future.0
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