Hi - I have a rental property funded with a repayment mortgage. As with all repayment mortgages there is a higher element of interest in the initial years which declines throughout the life of the mortgage.
I am intending to offset the actual interest paid each year as an allowable expense as shown on the MIRAS form which obviously means that my allowable expenses will be higher at the start of the rental life of the property and then reduce as each year passes.
Can someone confirm that this is correct? A colleague suggested to me that I work out the total interest over the life of the mortgage and average it out so that it is the same each year but that doesn't seem right to me. Thankyou
Your mortgage provider should issue a certificate of mortgage interest on request and it will show the amount of interest charged in the tax year, mine doesn't currently charge for this service.
I don't think it would be correct to calculate the total interest over the life of the mortgage and average it out as unless you have a fixed rate for the term then it will fluctuate over time and as you say with a repayment mortgage it's higher in the initial years. It needs to be the actual expense incurred in the period to which it relates.
By the way - MIRAS form? Is this still around, I thought MIRAS ended a long time ago, not sure how it's relevant now?
