Remortgaging house for rental purposes

J

JJ1310

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My wife and I have bought a new house but have not moved in as of yet, waiting for the New Year. We are currently living in my wives house which she has owned now for 4 and a 1/2 years. We have the house for sale for the last six months but the market is very quite. The break down of the properties are as follows

New property: Mortgage is 694,000 approx 3400 a month.
Wives property is valued at 360,000 but remaining mortgage is only about 80,000

If we cannot sell and we are in the new house we are considering renting the property. I am aware that this would have to be a long term commitment to offset CGT.

I suppose I have two main questions:

The first is can we remortgage my wives property to the lets say 92% i.e. 331,200. The reason for this would be to offset the new rate of interest against potential rental income. Rent income in the area at the moment is very reliable and about 1600-1700pm for the property. If we can only go off the existing interest on the mortgage we will probably end up paying a lot of tax on the rental income. Also can this be offset against a pension fund for my wife?

The second is, if we do rent the property obviously we will now be liable for CGT when we sell the house down along the line. So does this work from the original price paid (i.e. 4 and a 1/2 years ago)or the price when the property is declared as an investment ( if we decide to go along the rental option).

Apologies if my terminology is a bit all over the place.

Any help would be greatly appreciated on the above

Thanking all in advance
 
JJ1310 said:
The first is can we remortgage my wives property to the lets say 92% i.e. 331,200. The reason for this would be to offset the new rate of interest against potential rental income.
Click to expand...

You can only offset against rental income interest on the mortgage outstanding at the time the former PPR becomes a rental/investment property. You cannot offset interest on any mortgage topup unless that money is used to purchase/renovate an investment property. If the money is used for any other purpose then you cannot write it off against rental income.
Also can this be offset against a pension fund for my wife?
Click to expand...
I don't understand what you mean.
The second is, if we do rent the property obviously we will now be liable for CGT when we sell the house down along the line. So does this work from the original price paid (i.e. 4 and a 1/2 years ago)or the price when the property is declared as an investment ( if we decide to go along the rental option).
Click to expand...
From the price paid in the first place. A proportion of any resale gain based on the time that the property was rented out compared to the time that it was a PPR will be assessable for CGT. This is covered many times in many existing threads.

 
Thanks Clubman

I was just wondering if my wife can write off a pension contribution against the rental income to reduce the tax
 
I don't think you can specifically set a pension payment against rental income however in your tax returns it would in effect act that way.

Rather than get my pension relief every month (and spend it) i claim it in my yearly returns, this reduces the tax bill or provides for a refund (like this year)
 
JJ1310,
€360k valued property and rented at 1600-1700pm is pretty good IMO.
What part of the country (or city) if your wife property?
 
North West Dublin. Rent was approx 1300-1400 pm month about a year and a half ago. Up a good bit alright to 1600-1700pm, some even getting 1800pm.
 
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