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Rental property and mortgage interest...

Rental property purchased outright by increasing mortgage on private home.

I have a new client who has generated funds to buy a rental property by increasing the mortgage on his home. His mortgage was almost paid off and instead of looking to take out a second mortgage to buy the rental property, he has increased his home mortgage by borrowing about £60,000 to buy the rental property outright.

He told his mortgage lender what he was borrowing the money for and they let him. I think he has been badly advised as I doubt I can use the mortgage interest as an expense now. Can anyone confirm if I am correct please. Even if it could be used, it will be difficult (but not impossible)to work out exactly as he had about £2,000 still on the mortgage.

Thanks

 

 

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By Ruddles
07th Nov 2017 12:46

I can confirm that you are not correct. (Notwithstanding the impact of the new rules on interest relief.)

And what is so difficult about £x (interest) x 60/62?

Thanks (3)
07th Nov 2017 12:58

Oh dear or dear!

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07th Nov 2017 13:10

No Wendyx you not correct.

Classic error, but you are not alone.

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07th Nov 2017 14:06

Yes, it would appear that your client has been terribly advised. The malady continues I fear.

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07th Nov 2017 14:13

If your client borrowed this money from a friend or relative the interest would be tax deductible in his property letting business as it is W&E etc. Your client has simply borrowed it from a bank instead (secured on his house). Why should that make any difference under the relevant tax legislation or case law (unless you are Richard Murphy)?

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