A question about 2 mortgages

nomorespending

Hello,

I wonder if you could offer me any advice - its a long story so please bare with me!!

I have 2 houses - one which i rent out and will be my pension - it has 23 years left on the repayment mortgage and is in 2 parts - £90k and 10K I borrowed £10 k against the house 2 years ago to buy my x partner out of the house i live in. The interest is tracker so low at the mo. My repayments are about 530 ( 480 for big chunk and £50 ish per month for the £10K)
I get £660 per month rent and have fabulous long term tennants who look after the house really well.

The house i live in is on the market at the mo for 250K the mortgage is 183K and is interest only so I pay about 550 per month but thats jsut interest. I have been trying to sell it but have just decided that I am going to get myself out of debt befroe I start paying solicitors fees etc so am going to stay in this house for the next 5 years. I will be debt free ( from credit cards etc - currnetly about £24k in debt from the break up with X partner and the months leading up to - transfered some of his debt into my name)

The interst I pay on the rented property is low in comparison with the £660 rent i get each month. I pay tax on it obviously and this year it has been fine because I have paid out a lot on the house in repairs etc and also because I had to rent out my property i live in now for 9 months at a big loss - at the time the interest only payments were 880 a month ( so i couldn't afford to live there alone) and the rent i got was about 700 so that ofsets how much money was taxable last year. I tried sellign it but it dodn't sell so rented it out. This year tax year april 10 - 11 i expect the tax bill will be huge as My main job takes me into the higer tax bracket alone.

So heres the question - Should I raise money ( say 10K) on the rented property and increase the amount I owe on it and therefore the interest I pay on it thus reducing the amount of tax I pay, and pay the 10k off the property I live in - which will reduce the amount i pay each month slightly as its interest only. OR is this tax ivasion? I must stress that I belive strongly in paying my taxes and pay tax on absolutely every thing i earn and the unearned income i recieve from the house. BUT if its not a bad thing to do - is it wise?

PLease help - i've been pondering about it for a while now - they may not even increase my borrowing - but i think they prob would as my earnings are high enough to pay both mortgages and I have long term tennants -
all advice very gratefully recieved x

getmore4less

How much was the house you rent out worth when first let?

Thats the max debt on which you can claim tax relief if you can extract capital from the letting business.

nomorespending

Hi getmore4less,

The house was prob worth 150k when first let, and worth about 170k now.

I don't know about max debt i can claim tax relief on, i just know that I can claim tax relief on the interest I pay on the morgage, which ofsets the amount i recieve in rent. Last year the interest paid on the mortgage for which I can claim tax relief was 1144 but i recieved 7920 in rent. Like I said - last year it wasn't too bad tax wise as I'd spent a lot of money on the house over the year.
Hope that makes sense..