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Tax Insider Tip: Cash Then Mortgage

11th Sep 2013
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Tax Insider publishes monthly newsletters and reports.

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Interest rates on mortgages are at an all-time low but there are reasons why using available cash to purchase a property rather than taking out a mortgage may be necessary or beneficial.

Use Cash
•    When you can secure a discount on purchase by doing so.
•    If by not paying cash the sale will fall through – mortgages can take weeks to materialise.
•    When the rental profit exceeds interest payments with sufficient remaining to prove that the return on the cash invested is greater than if the money had remained in a savings account.

Then Mortgage, If Necessary
If cash is used to finance the purchase initially and then the property is mortgaged to replace the cash, the interest paid on the mortgage will be allowable in full against the rental income when received. The reason for the interest payments being allowed is ‘intention’ – the intention all along was to purchase the property via a mortgage; the cash is being used merely in place of a bridging loan.

This is a sample tip taken from our 136 page guide:
101 Ultimate Tax Strategies Revealed.

Click here to receive a free copy of this tax saving guide today!

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