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Re-mortgage to buy another property

Last post Tue, Nov 11 2008, 3:07 PM by conmankiller. 3 replies.
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  •  Tue, Nov 11 2008, 3:07 PM

    Re: Re-mortgage to buy another property

    We have been told that this is not possible as there are tax implications on re-mortgaging a mortgage free property to buy another property.

    The implication would be that if you raise money by using another property, then you would not be entitled to offset the interest against the rental income from the different property you rent out.

    It is possible, but you would be double "whammied" i.e. no tax relief on the borrowed money....and have to pay more tax on the rental proceeds.

    Only borrowed money (the interest) raised on the let property itself, qualifies for tax relief against the rent.

    • Post Points: 5
  •  Tue, Nov 11 2008, 2:45 PM

    Re: Re-mortgage to buy another property

    Assuming you are going to re mortgage your current house on a BTL basis I can't see how there is a tax complication. You would set the interest paid on that mortgage (and other expenses) against the rent you get and pay tax on the difference. You have to consider CGT after three years but no doubt you're already aware of that. I'd go back to whoever has given you the advice and get them to explain further.

    Have you tried getting a residential mortgage on the new house ? You would be looking for a very low LTV so am sure you could find somebody to lend it to you. Maybe someone who deals with self builders.

    • Post Points: 5
  •  Tue, Nov 11 2008, 10:50 AM

    Re: Re-mortgage to buy another property

    Not an expert or an adviser, but 2 penneth.

    Could you raise a residential mortgage on the property you are about to buy, you currently do not have a residential mortgage and you have a substantial deposit, it could be a second home or holiday home etc. Then when you have completed the renovation, you could ask for a consent to let from the lender. Now what normally happens is that when you receive a consent to let the lender increases the interest premium, but if you take out a mortgage with no tie ins say on just SVR you call always switch to a proper buy to let mortgage. I know a friend that did receive a consent to let on his property becasue he was moving jobs, and the lender didn't increase the interest premium at all, or so he told me, it was with Cheltnham and Gloucester.

    You would have to pay tax on letting income and capital gains when the property was sold as you will know, but I can't see how your tax situation would be affected otherwise.

    • Post Points: 5
  •  Tue, Nov 11 2008, 9:44 AM

    Re-mortgage to buy another property

    My husband and I currently have 2 properties. 1 is on a buy to let mortgage and rented out, the other (our current main home) we live in mortgage free.

    We are looking to buy another property which needs a lot of work done to it. Its current value is approx £285,000. We have over £250,000 cash to put towards the new property and were looking to raise the extra money needed to complete the purchase and renovation by re mortgaging our current home and letting it out.

    We have been told that this is not possible as there are tax implications on re-mortgaging a mortgage free property to buy another property.

    Can anyone tell me if this is correct? Does anyone have any ideas as to the best way to raise the extra money we need?

    • Post Points: 50