BTL: ERC is it tax deductible?

sarah69696pink

Hi all
Currently have my BTL on the market, no offers yet.
Annoyingly timing all wrong and my fixed rate about to expire.
If I remortgage I’ll be locked in with an early repayment charge when it sells. So was debating going on to variable rate.
However wondered if the ERC will be tax deductible like a mortgage arrangement fee? In which case it may be worth me taking out the new mortgage rates.

anselld

It would be madness to take a new fixed rate if you are on the market, even if it is deductible.

It probably is allowable as a cost of finance subject to the limitations of Section 24 depending on your income. But that is a mute point.

sarah69696pink

Thanks. I’d be interested as to why it is madness. Don’t think it’s going to sell quickly market is not good in the area and interest difference is significant between fixed rate and SVR.

anselld

sarah69696pink wrote: »

Thanks. I’d be interested as to why it is madness. Don’t think it’s going to sell quickly market is not good in the area and interest difference is significant between fixed rate and SVR.

Well tell us the difference in interest rate, the size of the mortgage, the ERC and any fees for the remortgage and we can do the sums.

csgohan4

sarah69696pink wrote: »

Thanks. I’d be interested as to why it is madness. Don’t think it’s going to sell quickly market is not good in the area and interest difference is significant between fixed rate and SVR.

Every house will sell for price, is it overpriced, slow market?? Dare to put the right move link on here?

sarah69696pink

No not interested in getting views on asking price etc been ad used market is quite saturated at the moment and a huge portfolio of properties in area have recent sold upon death of a property developer so not a great time to be selling.

With regards to whether it is madness I’ve done the sums and that’s why I wondered why such a strong view. If ERC is deductible (which it appears to be) better to take out new rate. If it wasn’t deductible I would have considered staying on variable so long as property sells in next 6 months. But I’m aware unlikely to even get an offer now until end of jan / Feb and even then completion can take months.

anselld

sarah69696pink wrote: »

No not interested in getting views on asking price etc been ad used market is quite saturated at the moment and a huge portfolio of properties in area have recent sold upon death of a property developer so not a great time to be selling.

With regards to whether it is madness I’ve done the sums and that’s why I wondered why such a strong view. If ERC is deductible (which it appears to be) better to take out new rate. If it wasn’t deductible I would have considered staying on variable so long as property sells in next 6 months. But I’m aware unlikely to even get an offer now until end of jan / Feb and even then completion can take months.

Do you understand what deductible means?

If ERC is, say £1000, you could save the tax on that, ie £200. You have still lost £800.

Unless it is a very small ERC there is no way you will save enough interest in a few months to fund it, tax deductible or not. If you are planning to stay on the market for a very long time then that is also madness.

sarah69696pink

Thanks all for your help. ERC isn’t that much and the monthly difference in fixed rate and SVR is huge.

dimbo61

Well about 90% of BTL mortgages are on Interest only so what difference would 2/3% make to 5/6% IO

Glover1862

Yes, you can right off the erc against income tax in the tax year in occurred, I’m not an accountant but that’s what my accountant did.

Look at Coventry building society, they do a flex x product which is a fixed rate but without an erc, you pay a little extra and the product fee is £999, depending on the size of the mortgage and how long you it takes to sell, might be worth it.

SmashedAvacado

can you get a tracker or discount - often they do not have an ERC at all. I used an HSBC one and sold after about 3 months