Buy-to-let offset

dcc251

Can anyone tell me if it is possible to get a buy-to-let offset mortgage. Have been speaking to a friend and have just discovered the has 39k mortgage on a buy to let property and 65k in savings which he isn't using!
Thank you.

armour

Hi, I'm in the same boat as your friend. I've paid off my residential (offset) mortgage and have an £80K mortgage on a buy to let flat worth £150/160K. I have about a grand spare at the end of every month and it would make sense to park it in an offset.
Do any of you knowledgeable people know of any offsettable BTL mortgages?

armour

Shameless bump.........anyone got any info?

Senior_Paper_Monitor

No such product exists I am afraid.

The nearest is a BTL which strangely changes to an offset after the intial deal period.

We have lobbied a number of BTL lenders to introduce such a product but the response we have is pretty negative, occasionally quoting '"tax implications" as the reason although we haven't actually worked our what those might be.

We have a number of clients on the books who would jump at such a facility.

armour

Another shameless bump.

It's coming up to end of deal time. Anyone know of an offset BTL mortgage. I can't find one.

The only tax implication I can see is that it would be easier for the BTL borrower to organise their finances in a more tax efficient manner.

Surely a lender would grab loads of buisness, at an increased margin, if they brought out such a product?

Wh05apk

armour wrote: »

Another shameless bump.

It's coming up to end of deal time. Anyone know of an offset BTL mortgage. I can't find one.

The only tax implication I can see is that it would be easier for the BTL borrower to organise their finances in a more tax efficient manner.

Surely a lender would grab loads of buisness, at an increased margin, if they brought out such a product?

If your residential property is unencumbered, could you not just take the mortgage against that on a residential basis, rates would be far less than BTL and you would have a choice of lenders.

armour

Hi Wh05ak, the only problem with that would be that the interest paid wouldn't be tax deductable.

What I want is the ability to vary the amount owing on the BTL over the year to:

a) invest in stocks on a short term basis.

b) alter the interest paid on the BTL throughout the year so that I don't stray into the 40% tax band.

somethingcorporate

armour wrote: »

Hi Wh05ak, the only problem with that would be that the interest paid wouldn't be tax deductable.

What I want is the ability to vary the amount owing on the BTL over the year to:

a) invest in stocks on a short term basis.

b) alter the interest paid on the BTL throughout the year so that I don't stray into the 40% tax band.

As long as the funds were taken out for the purpose of the business then the interest IS tax-deductible.

I am sure Holly will be along shortly to give the longer and much better answer.

holly_hobby

You don't say whether you already own a BTL, or are planning on buying.

As SPM. has stated, there are no current BTL offset products, but as WH05. has suggested there is a good comprimise in actually using your primary residence as the source of BTL funds, effecting an equity release remortgage on an Offset arrangement (subject to max LTVs etc).

And whilst you will be offsetting the capital held in the linked deposit account against the whole mge debt, any residual mge interest that is accrued (on the capital used to fund the businesss), is also a permitted tax deduction from your rental income.

Obviously to satisfy any HMRC review (and especially if the os resi mge balance, is not entirely associated with funding the business) you must have a clear audit trail showing how much of your OS resi mge is directly linked to the business (which can be to actually purchase a dwelling or capital injection for other reasons).

The only other issue you need to be aware of, is that residential mge affordability is assessed on your income, and generally won't consider rental income (although some will consider, if you have at least 12 mth history and returns on generally an unencumbered property). Where as affordability under a traditional BTL mge (notwithstanding any min income requiremetns), is based on rental income (@125% of mge interest) - which may affect your options or not as the case may be.

With regards the tax status, your 40% will be based on your NET rental returns tipping you over, so obviously the lower the chargeable mge interest, the higher the net yield, which equates to a higher amount of net profit to be reported for tax purposes.

There are other ways to mitigate tax, including of course holding the property and reporting returns with your spouse (ie under a TIC and Form 17 arrangement, in favour of they with the lowest income ), or your partner (assuming equivilent TOE would be under 125K to avoid SDLT trigger), if you and they are happy to share both legal ownership and any mge commitment ?

Your tax adviser will guide you accordingly.

Hope this helps

Holly

Thrugelmir

armour wrote: »

Surely a lender would grab loads of buisness, at an increased margin, if they brought out such a product?

To complex to administer, or in other words borrowers wouldn't pay for the service.

Lenders reset the interest rate and therefore the amount to be collected from the borrower at either:-

Senior_Paper_Monitor

Having contributed earlier, and subsequently gone off to research - the issue is that while you can raise capital for the BTL investment on either the actual buy to let property or another residential property is has to be identifiable, with audit trail, specifically for the use of the investment in order for the tax relief to apply.

If you are moving funds in and out of the pot, then it would reasonably be argued that the funds - or part of the funds - were not specifically the investment.

Hence virtually no BTL offset accounts (other than the one I mentioned above - and I haven't checked recently whether that still exists).