Remortgaging buy to let and releasing equity

Dooley

Hi
I’m planning ahead, I’ve got a few months yet, and wondered if anyone has done what I’m hoping to.

I’ve got two mortgages, one for the house I live in and one buy to let for the property I let out. I have a similar amount of equity in each. They’re both up for renewal around the same time.

I’d like to get some money out of the rental and use that to pay more off my own home mortgage. Is it as simple as borrowing more? ( don’t you have to normally say what you want it for, ie home improvements or something?)

I might need to get an accountant’s advice, especially to make sure I’m all above board tax-wise, but in the meantime, any thoughts please?

chunkytfg

Would that not mean you would owe more money on a higher interest rate? BTL mortgages don't have such good interest rates so shifting the debt to the one that costs you more would be an odd choice no?

foxy-stoat

Your idea sounds crazy - paying off a cheaper loan with a dearer loan and reducing your tax deductible expense in the process.

I know in a year or 2 you wont be able to use the interest payments as a tax deductible expense.

What are your interest rates on both mortgages and any fees in pulling equity out of your rental? Whats the LTV on the rental?

Dooley

Oh, this is why I'll need to speak to an accountant first!

It's because the rent more than covers the mortgage so I'm making profit, and I pay tax on every bit of profit I make.

So, if I was making £200 clear profit (forgetting mortgage/interest and all that), I'm getting taxed on that. If I borrow more, making the mortgage repayment higher, so I'm only making £100 a month, that's less tax I'd pay, and that money I'd free up can be used as a deposit to get me a better rate on my home mortgage.

As it is, the BTL LTV is less than 70%. Both mortgages have similar interest rates of about 2%. They are both up for renewal at the same time roughly and I don't know what rate I'll get then (Brexit prob won't help!), but there'll be no exit fees.

Ultimately, I was trying to reduce my payments on my home mortgage, for which I'd need more money to put up, so as to borrow less.
I don't mind if my BTL payments go up, so thought I could free up that money.

Maybe long run it wouldn't be better interest wise, maybe I should just overpay on my home mortgage with that £200 a month, but I'm thinking about saving on tax payments too.

LRmortgage

But the government is doing away with being able to offset BTL mortgage interest as an expense. They’ve already started to reduce the amount you can use and are reducing it further over the next couple of years. So the tax benefits will not be as beneficial as you think.

getmore4less

Structured properly you would be getting tax relief on the residential borrowings upto the value when first let.