Remortgage Buy to Let

thriftypants

Hi, new to this forum, so apologies if this has been asked before. I have a buy to let flat that I've owned since 82 and paid off the 12k(!) mortgage in 86. I moved areas so it has been rented out since 84. I own another property which I live in and has a mortgage of £70k.
I have only recently gone back to work after seventeen year career break raising kids. Would it be a good idea to remortgage the buy to let and pay off my residential mortgage? I'm hoping this would mean I could get tax relief on the interest. Any thoughts appreciated. I realise BTL interest rates are higher but figure it would still work out cheaper with tax relief.
Thanks.

silvercar

You can caim mortgage interest as an expense upto the value fo the property when you first started letting it. You need to find its value in 1984.

thriftypants

ok. So if I sell the flat to my brother, use some of the money to pay off my residential mortgage, then buy it back off him with buy to let mortgage, can I then claim interest relief on the current value of the property?

margaretclare

thriftypants wrote: »

ok. So if I sell the flat to my brother, use some of the money to pay off my residential mortgage, then buy it back off him with buy to let mortgage, can I then claim interest relief on the current value of the property?

Mind-bogglingly complicated - why ever would you want to do this? If you don't want the flat and can sell it to your brother, fine, but why on earth would you want to buy it back, and on a mortgage? You'll be paying for it for ever - things are a lot different than they were when you bought it originally. Haven't you been reading some of the dire warnings that there are in today's press, all about the credit crunch, falling house values, possible recession and all the rest? Time to draw in the horns and batten down the hatches, many people are saying!

Margaret

lic

You own the flat,
You want to remortgage it, to use the funds to pay off your domestic mortgage. (good plan).
You want to sell it to, and buy it back from your brother! WHY?
If this is a means to avoid CGT, then you are going about it the wrong way.
Just remortgage it. The tax man does not want to know what the money is for, you will not be penalised by him for doing this. You can then claim the interest payments(and other expenses) against your tax bill.
If you sell ther property, and then buy it back you will have to pay land reg. and other costs (possibly even twice).

thriftypants

I was just being hypothetical. The whole point of remortgaging the buy to let is that I would get relief on the interest rather than if the loan is on my own house which doesn't get interest relief. When I wasn't working, it didn't make any difference as I didn't pay tax anyway.

thriftypants

Silvercar was suggesting, and I think I have read this elswhere too, that interest relief only available on the value of the property when renting commenced, very little back in 84.

thriftypants

...and sorry to keep adding bits, but I woudl be crazy to sell the buy to let. It brings excellent rental income and has never been empty since 84. It cost me £11k to buy and is now worth about £120k. I just see it as a hassle free nest egg I spose.

margaretclare

thriftypants wrote: »

...and sorry to keep adding bits, but I woudl be crazy to sell the buy to let. It brings excellent rental income and has never been empty since 84. It cost me £11k to buy and is now worth about £120k. I just see it as a hassle free nest egg I spose.

Well, hang on to it then! Why think of all the hassle - not to mention costs! - of selling it to your brother and buying it back on yet another mortgage? You were the one who talked about selling it!

In case you hadn't noticed, nothing much seems to be selling at present, no matter what it appears to the 'worth' in theory. Next door have had their 2-bed bungalow on the market since before Christmas, they're now on their second estate agent and AFAIK they've only had it looked at once.

Margaret

seven-day-weekend

I personally woould remortgage the BTL anyway so that you don't have a mortgage on your main home.

If disaster strikes (and sometimes it does), then your main home is safe and you can always sell the BTL if necessary.

We sold our investment property in 2005 (main home mortgage-free) whn our circumstances changed and cleared off its mortgage and other debts. We are now debt-free.

michaels

Sounds like a good plan the sale and buy back especially as it comes under the stamp duty threshold. You might have to get a HIP tho but obviously agents fees aren't an issue and you could hopefully do a deal on legal fees (may be free via the new mortgage?

However you would probably be liable for Capital Gains Tax which I know will be payable at some point but needs to be factored in paying it now rather than later. I don't know what tax band you are in but if you get a 100k mortgage at say 6% this would allow you to offset 6k of the rent pa so worth 1200 for a 20% tax payer.