2nd Property Dilemna

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Hi
Looking for advice
My Husband and I are in the process of buying a new family home .. our existing home we were hoping to keep on and rent as a long term investment.
The mortgage on it was paid off in 2015 and we have managed to put together almost 2/3 of the cost of the new home so we are in a very comfortable position thankfully.

However looking at the figures closely we are not sure if this is a prudent move ...

As there is no mortgage on the original property we cant claim for mortgage interest and thus all rental income will be taxable [ less allowable deductions]
Could we take the mortgage we need to purchase the new property out on the original home ? [It would probably need to be a buy to let mortgage] and if so could we claim the mortgage interest accruing against the rental income ?

Any suggestions /advice welcome
 
The short answer is no. You can only deduct interest on a loan used to buy a rental property.

For further suggestions you would need to give a lot more info.
 
Great thanks a mill .... I assumed as much.

Well the original home is in my husband's name he bought it in 95 and we got married in 99 but never changed the ownership into joint names.
It should be easy to rent as we are on a good bus route to numerous universities ...Id say we could get approx 2k rental per month

The new house is costing us 700k and we are taking a mortgage of 250k from AIB at 3.1% over 15 years

What other info can I give you ? thanks again for the advice
 
Well you have two choices, sell or hold the old house.

If you hold you will have an income of €24k less expenses say €3k, less tax.

What long term plans have you for the house if you hold, will you sell it eventually ? Do you see it as providing accommodation for family members in the future. Do you have kids who might attend one of those Universities ?

If you sell, well you don't say what you could sell it for. If you got €250k you would save yourself €7,750 per annum interest on the new mortgage. If you sell you will not have to pay CGT as it has been your home.
 
Yes long term I would hope we could leave it for the kids or worse case scenario sell it to meet assisted living costs if needed [ what a depressing thought }

Its possible that we could get 500k for the hse so we could easily cover the mortgage on the new house , we had naively thought that with interest rates so incredibly low that we would be wiser to leave the value in the house.
 
I dont see why that would be naive. I suggest that you do out a business plan for your new rental business, maybe post it here and get responses. You get more reaction to a plan than a rather open ended question.
 
do the sums over 15 years I guess

Sell the house and you have no mortgage, you can put the balance on deposit, or invest it in some other way.
Keep the house and you get X amount of net rent, but have to pay Y amount of mortgage interest (63K according to the mortgage calculator)

of course there's no way of knowing what interest rates, rents and property values will do over that period of time so either option is a gamble to some extent.
 
Agree do out a plan with numbers etc.
Key question is do you want to be a landlord?

There is another way, bit of work but doable. Sell the house use the money to buy your new house that you want as your ppr going forward. Take the remaining money and get a mortgage and then buy a similar house to what you have near where you are and then rent that out. As that mortgage is buy to let it is deductible.

Not suggesting you do this of course as you're in a good position financially it appears but this is a way to get the mortgage tax deductible. Makes no sense having a buy to let mortgage free and then paying interest on ones own ppr which isn't allowed.
 
I wouldn't agree with Gerard here. I dont think it is a good idea to borrow money just to get the tax break on the interest, remember you would still have to pay that interest.
 
cremeegg said:
I wouldn't agree with Gerard here. I dont think it is a good idea to borrow money just to get the tax break on the interest, remember you would still have to pay that interest.
Click to expand...

Completely missed my point. Of course I am not saying borrow money to pay interest to avoid tax. Not what I said. Illogical. Pay one euro to save 50 cent. Of course not.

I was suggesting a rearrangement of the situation, no increase in borrowings but a smarter way to do it, ONLY IF they wanted to buy a ppr and keep a buy to let.

Personally I would advise against, if they want new ppr sell the existing one and buy a new one. Seems like it could be done mortgage free.
 
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