Offset mortgage to fund buy-to-let...

TaDa

Hi!

I have a long standing offset mortgage with the Woolwich.
The offset mortgage has a 'mortgage reserve' which allows me to 're-borrow' some of the funds that I have already paid off.
That 're-borrowed' money would be at the original rather low rate.

I would like to buy a second property and let it out - if I go to the market for a buy-to-let mortgage the rate is much higher than that I can 're-borrow' from the Woolwich on.

I know I can borrow the money, buy and let the second property
but, technically, the mortgage is against my home.

Can I 're-borrow' the money and still use the rental income to pay back the mortgage _before_ the tax is paid?

Cheers

ACG

You would need to check with woolwich to see if they allow that.

Dont forget, assuming your declaring the income from the property you can put the interest down as an expense. So although the rate may be higher, you end up getting some or all of it back by way of a reduced tax bill (you can do that even if you draw down on the offset facility also I believe - get out clause... always seek professional advice from an accountant )

amnblog

Did we not have a poster on here last week who wanted to sue 'the world and his wife' because her Parents had been making extensive use of their Mortgage Reserve over a number of years?


It's a strange world.

TaDa

Hi ACG

Yes, the Woolwich are happy enough to do this.

LOL - I understand the tax benefits on the borrwoings - I just need clarification as to whether this is possible utilising the 'offset funds'.

I did ask 'my' accountant but he first said "yes" and then latterly "no" so I'm a little confused - hence my post :-)

amnblog

Sounds like a top accountant!

ACG

If I was a betting man, I would say it can be done. But im not qualified to give that sort of advice. However, I would suggest you get an accountant who is a little more confident as there is a lot at stake if its wrong.

Bare in mind you are securing it against your home. It would also need to be on repayment, where as a BTL would not. Personally I would say the less secured against my own home the better.

TaDa

ACG wrote: »

Personally I would say the less secured against my own home the better.

Thats a very good point.

amnblog wrote: »

Sounds like a top accountant!

He's normally very good - perhaps he has had a change of heart for some reason - there was a year between statements.

ACG

Are you self employed TaDa?

TaDa

Hi ACG
I run a limited company - hence the accountant - but I don't want to hold the building as an asset of the company