Ofset interest against rent. Which property loan - Let to Buy

jase_31

Hi Can someone help me out with this, just trying to put info together for my tax return.!

Purchase House 1 on Morg First Time Buyer (only house)
Purchase House 2 on a Let to Buy mortgage (this become my main house, and I let out House 1).

Which mortgage do I need to offset rental income of House 1.

Second mortgage is 10k lower than first mortgage - but is more expensive.

terryw

If the second mortgage was used to purchase the let property then the interest on this can be set against the rent for tax.

silvercar

You can claim the interest on loans upto the value of the property when first let as an allowable expense against rental income. There is no obligation to have the loan(s) secured on the property that is let or that all the interest claimed as an expense be secured in one mortgage.

So, what was the value of the let property when first let? What is the total of your mortgages? If the latter is less than the former then all the mortgage interest (not capital repayments) are an allowable expense. If the mortgages exceed the value of the property when first let then you can only claim a proportion of the interest.

jase_31

First house was purchased on 94k mortgage (value 100k)

Second house was purchased 2 years later with a new 85k mortgage secured on the new property (property value 150k)

All mortgages are interest only.

silvercar

If you let out the first house when you bought the second, you need to find the value of the first house at the time you started letting it. Depending when you bought it that could be higher or lower than its purchase price.

If the first house is still on a FTB mortgage, you should get consent to let from the lender. Likewise the second home should have a residential mortgage if you are now living in it (though this is less of an issue.)