Remortgaging a BTL
Discussion
How does tax relief work on a btl when you remortgage?
Not only does the interest rate change (less), but also the total repayment figure (assuming you increase the LTV figure).
Do you just keep the total amount you were claiming for the same, but claim it at the new (lower) interest rate?
Figures probably helpful here - for illustration purposes, not my actual figures.
Primary residence house bought for £300,000.
Original mortgage £240.000 (80% LTV, interest only at 5%)
Pay off £90,000 and then rent it out (50% LTV, £150,000 mortgage, payment £625 pcm).
Remortgage for £200,000 at 4% (70% LTV, payments £667 pcm).
What figures now go on the SA tax form?
Is it £500 (£150,000 of the £200,000 at 4%)?
Ta.
Not only does the interest rate change (less), but also the total repayment figure (assuming you increase the LTV figure).
Do you just keep the total amount you were claiming for the same, but claim it at the new (lower) interest rate?
Figures probably helpful here - for illustration purposes, not my actual figures.
Primary residence house bought for £300,000.
Original mortgage £240.000 (80% LTV, interest only at 5%)
Pay off £90,000 and then rent it out (50% LTV, £150,000 mortgage, payment £625 pcm).
Remortgage for £200,000 at 4% (70% LTV, payments £667 pcm).
What figures now go on the SA tax form?
Is it £500 (£150,000 of the £200,000 at 4%)?
Ta.
?Bit of Googling seems to have answered this - and it's quite interesting so I'll post here for the benefit of other Landlords who may be thinking about remortgaging.
Unless corrected by Eric, it would appear that you can claim tax relief on the interest payment of the new mortgage up to the initial purchase price of the property.
Unless corrected by Eric, it would appear that you can claim tax relief on the interest payment of the new mortgage up to the initial purchase price of the property.
rfisher said:
Bit of Googling seems to have answered this - and it's quite interesting so I'll post here for the benefit of other Landlords who may be thinking about remortgaging.
Unless corrected by Eric, it would appear that you can claim tax relief on the interest payment of the new mortgage up to the initial purchase price of the property.
I'm not sure with that.Unless corrected by Eric, it would appear that you can claim tax relief on the interest payment of the new mortgage up to the initial purchase price of the property.
Shouldn't it be up to the value of the property at the time it first enetred the rental market?
The general rule regarding allowability of interest for tax purposes is the REASON why the loan exists.
If a loan has a dual purpose, then any interest on that loan should be allocated based on the different elements of the loan and those elements that are allowed for tax purposes can be claimed against the income generated.
If a loan has a dual purpose, then any interest on that loan should be allocated based on the different elements of the loan and those elements that are allowed for tax purposes can be claimed against the income generated.
Not sure if this helps but I've been through the mortgage/remortgage path a few times.
Loans have usually been secured on existing BTLs to either fund new BTLs or to help buy a bigger home for personal use. Mrs C has always treated interest costs on BTLs as an allowable expense and HMRC haven't queried it / challenged it.
Not disagreeing with Eric but I'm not sure how HMRC would be able to prove that such borrowing WASN'T for legitimate purposes.
Loans have usually been secured on existing BTLs to either fund new BTLs or to help buy a bigger home for personal use. Mrs C has always treated interest costs on BTLs as an allowable expense and HMRC haven't queried it / challenged it.
Not disagreeing with Eric but I'm not sure how HMRC would be able to prove that such borrowing WASN'T for legitimate purposes.
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