Hi, i wonder if someone could help. I'm not a professional accountant (or anything like) but thought this the best place to post a plea for help.
Briefly, we own two properties.
My husband's sole name is on one ' value £120,000, mortgage £37,000 (we rent this house out)
The other is in joint names and is our principle residence ' value £170,000, mortgage £80,000
At the moment we are asset rich (not too rich!)and cash poor ' how can we get at some of the money tied up in the properties? I don't really want to take a loan against the properties.
someone did suggest that i may be able to offset the interest against the rent for tax purposes
any suggestions/advice will be very much appreciated
Andrea Tobin
Replies (5)
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Email
Andrea, please email your phone number to me ([email protected]) and I will call you to discuss further.
An alternative view
I have clients in the same situation as you and have advised them to do the following.
Remortgage the rental property up to the value of the property when you first rented it out (usually the purchase price).
The cash you get from the remortgage can then be spent on anything you like (i.e. it doesn't have to be spent on the rental property) and you can now claim full tax relief on the interest.
This is as a result of a change in the tax rules about 10 years ago which weren't publicised very widely at the time!
If the original value of the rental property is only £37k and hence you have no scope to do the above, there is also a way for you to increase this 'original' value to £120k.
Options
You could raise your mortgages - but be careful regarding interest claimable for tax purposes. Any interest due on the increase in the loan on the rental property or your own home would not be allowable unless that money was used in the rental property (rennovating it or buying it in the first place).
Now if you didn't want to keep the rental property in particular you could sell it and get a full mortgage against another one - and all that loan interest would be allowable for tax as the full proceeds of the loan would be used in that property business. Of course the downside is that any capital gains tax payable on the increase in the value of the property would become payable, so if you decide on doing this work out if you should probably get property put in both your names (and therefore get two free capital gains tax bands so that no tax is payable on the first £17,000 of the profits) or transfer the property into the name of the spouse paying least tax (you would need to do a few calculations to work out which was best - but probably the former).
The only other obvious suggestion is equity release - but bear in mind that these schemes give a small fraction of what the house is worth and are therefore only really useful for elderly people who didn't want to leave their house to anyone in particular.