Can I do this ?

00ec25

BitterAndTwisted wrote: »

The lower interest-rate isn't advantageous as that's the only part of a mortgage which you can offset against the rental income for tax purposes.

basic maths and business sense tell you this is wrong

OP needs to borrow 40K as he has a 30k cash deposit.
Every 1% of interest payable on that 40k borrowing costs £33 per month in interest payments.
OP receives 425 pm in rent and would therefore have to be paying interest at 13%pa before the interest charge would completely absorb the rental income leaving no taxable profit. Until that time every £33 of interest charge will only save him £6.60 (£33x20%) in tax leaving him £24.40 per month worse off for every extra 1% by which the interest rate increases.

Obviously there are other costs incurred which can be offset against net profit so the break even pint will be lower than 13% but with interest rates currently low then a charge of 3% residential compared to 6% BTL would save a lot more than his reduced tax from paying at 6%

in summary: borrowing at a lower rate will save him more than maximizing his interest cost to reduce his tax bill

jackomdj

If your mortgage on your house (the one you live in) can be shown to have funded your rental property then you can use that interest when preparing your accounts. I know because we do this, we use an accountant and it is fine.

Ivana_Tinkle

InMyDreams and 00ec25 - thank you so much! I've wanted to ask about that for ages because it never made sense to me but I was sure I was missing something!

G_M

monty-doggy wrote: »

Yes but I have rented privately for 15 years and no one would hand me a discount even if I lived here another 20 years!

It's a sensitive subject, and it does annoy many people who work hard, pay over and above what council tenants pay, and then public funded housing gets sold off at a fraction of the market value.

I don't see why a discount should be offered, just because you've lived there a long time!

Your issue seems to be the discount offered when council tenants buy their homes, courtesy of Maggie Thatcher.

That has nothing to do with the current query, which is about using an unencumbererd residential property to raise a loan to invest in a business (BTL).

monty-doggy

G_M wrote: »

Your issue seems to be the discount offered when council tenants buy their homes, courtesy of Maggie Thatcher.

That has nothing to do with the current query, which is about using an unencumbererd residential property to raise a loan to invest in a business (BTL).

I'm sorry it came across crappy. It's not the OPs fault, if its there to be had take advantage by all means. The system is just sh@!e