Collateral for extending interest-only mortgage

aroominyork

We have an interest-only mortgage on our home at an LTV level around 33%. The bank agreed interest-only based on the loan amount being covered by the value of some commercial property my wife owns in Australia (though they never asked to see any documentation!). The commercial property will be sold soon and we want to put the proceeds towards a buy to let property in the UK. We would then like to extend our home mortgage to around 55% LTV so that we can purchase the new buy to let property outright. My question is whether the bank would be likely to agree this additional loan on our home, with the value of the interest-only mortgage beng covered by the new investment property.

pcgtron

My question is why you want to buy the investment property outright which means you can'toof set the interest on the mortgage against your tax bill

getmore4less

pcgtron wrote: »

My question is why you want to buy the investment property outright which means you can'toof set the interest on the mortgage against your tax bill

If done properly the loan on the main house will be eligable for the tax relief upto the value of the BTL.

aroominyork

Thanks pcg and getmore. The reason for extending our home loan instead of getting a BTL mortgage is that we will get a better % rate, but you raise a good question about offsetting interest. If I understand getmore correctly, we can say the BTL will be our vehicle for paying off our home loan when we reach retirement age (assuming the bank calls in the loan then) and we can get tax relief so long as we have an audit trail to show that the additional home loan is being used to purchase the BTL. Is that right?

ethank

I don't think so I thought that having a BTL mortgage related to the BTL property means that you can offset your BTL interest payments against your tax liability on letting the property.

aroominyork

But, ethank, I think getmore is saying we can offset interest payments on the amount of our home loan which was used to purchase the BTL.

getmore4less

aroominyork wrote: »

But, ethank, I think getmore is saying we can offset interest payments on the amount of our home loan which was used to purchase the BTL.

If done properly, get proper advice

Interest only might be an issue for a lender.

aroominyork

So that takes me back to me original question. Would most lenders increase an interest-only home mortgage if the amount of the overall loan was more than the value of the BTL property?