Don t really want my mortgage paid off because

Pin_Head

I rent my place out and therefore can claim the interest paid on my account back when I file my tax return. Any tips on what to do? Flipping the mortgage, pulling equity out of the property.

Any tips on which lenders may help me?

Thanks

Pin

ghosti

if you remortgage as a BTL then it shouldnt be a problem, especially as the place is currently rented out. i know a lot of lenders these days want the property let for the last 6/12m in order to get a good interest rate from them.

if you have other outstanding mortgage/loans then taking the equity out of this place would be a good idea to maximize your expenses in interest on the BTL. most BTL mortgages ask for 75% LTV to give an idea of how much equity you might be able to take out..

anselld

Pin_Head wrote: »

I rent my place out and therefore can claim the interest paid on my account back when I file my tax return. Any tips on what to do? Flipping the mortgage, pulling equity out of the property.

Any tips on which lenders may help me?

Thanks

Pin

What is your Mortgage interest rate? The logic of maintaining a mortgage for tax purposes only works if if your (net) mortgage rate is less than the (net) return you are getting on the capital.

Pin_Head

2.5%.

Thanks for your help.

Property value is £205000
Mortgage outstanding is £12000

Current mortgage is a standard repayment.

racing_blue

If you have done the sums and it is worth the bother for £12K, why not mortgage the house for £120K & get 10x the benefit?

Pin_Head

Thxs.

Buy to let or normal repayment?

Any good deals there? Was thinking if a repayment 5yr?

kingstreet

Why do you think you need to make a change to your mortgage?

Pin_Head

So I can pay more interest which can be claimed back on my self assessment.

anselld

2.5% is a good rate for BTL but I doubt you can withdraw more capital at this rate.
If you get a BTL or repayment mortgage you will pay a higher rate and, whilst you will pay less tax, you will be worse off because you will not be able to invest the withdrawn capital at a higher interest rate. (unless you have plans for the capital that generate a higher return than the banks)
It is dangerous to become obsessed with reducing tax; you don't want to go around incurring increased costs just to reduce your tax bill. Do the maths first!

jackomdj

Do you have another property that you live in with a mortgage? If you do you may be able to offset the interest on this mortgage on your tax return, if you can show why you have the mortgage on a different property. In our case we maxed on our residential mortgage and used the minimum needed on the BTL because our residential rate was so low.

But remember you only get a % of the interest offset against tax (depending upon your tax bracket) so not a good thing to get a mortgage if not needed.

ToasterScheme

anselld wrote: »

It is dangerous to become obsessed with reducing tax; you don't want to go around incurring increased costs just to reduce your tax bill. Do the maths first!

^^This.

For 12k at 2.5% you are only paying £300 per year in interest. The tax relief on this is £120. Which won't even cover the cost of a re-mortgage valuation fee.

Why do you want to carry on paying the bank £300 per year so that you can pay the tax man £120 less?