My husband and I have just remortgaged our house and used the money to buy another one which we are letting out. The money from the remortgage has been used to pay for our new house in full. I assume that I am fine to offset the interest costs of the remortgage against the rental income from the new house even though there is no mortgage on the new house - is that right? Also, the new house was bought in my name only as I am currently a lower rate taxpayer so my husband doesn't have to declare the rental income - again, that is what I believe to be the case.
Also, my husband and I bought a mobile home in France last year and are renting that out also - I was going to declare all the income myself as I am a lower rate taxpayer but the mobile home invoice was made out to both of us so am I okay to do this?
The way that it should be done is that once purchased for cash (in order to drive down the price by offering a quick sale) take out a buy to let business loan for the property and then repay your own mortgage from the proceeds.
The type of remortgage that I hope that you went for was one of the overdraft types (also known as Australian mortgages) like a virgin one mortgage where you can pay money in and out as and when and on a day to day basis you only pay interest on the outstanding balance.
There is no capital gain in selling the property as there is no profit over what you paid for the property.
By taking out the buy to let loan you get interest relief on the loan.
The effect is the same as getting interest relief on your primary property as the money that you made pays off your own mortgage.
There is additional expense involved in another mortgage but the good news is that buy to let loans are not (usually) dependant upon multiples of your income but rather the income potential of the property.
You are likely to need to leave 20-30% of the value of the house in the property (dependant upon how much you forced the price down by paying cash you may come out close to 100% loan on your cash investment).
This is the way that property investors work. Buy for cash at 20+ percent below market value, take out a business loan on the property, move on to buy the next property and keep doing that on a wash and repeat cycle and hope that the property market heads in the right direction as the Beach Condo in Thailand is going to be on capital appreciation rather than rental income which often barely covers the costs.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi guys- I have found some information which states that HMRC do not limit the property on which the loan is secured against so as long as I have a clearly defined and traceable path for the equity raised to purchase the property I should be able to offset the interest on the remortgage which was used solely to buy the rental property. Not sure if this is correct but I have found more than one person who thinks it should be okay.
