# Remortgage home, then rent it out and get full mortgage interest relief



## Bronte (19 Dec 2007)

This comes up from time to time on AAM.  Can you remortgage your home, (say to go on holiday plus buy a car and build a conservatory, pay back credit card debt, loans etc), borrow about 100K and once the remorgage is in place move out and rent out the original house having purchased a new home. The benefit being that the interest on the original house can be offset against rental income.


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## jhegarty (19 Dec 2007)

I am not sure on rental income , but I know TRS can only be taken off the home improvment part of the loan (not the holiday , car..etc...).... i presume its the same


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## Glenbhoy (19 Dec 2007)

Bronte said:


> This comes up from time to time on AAM. Can you remortgage your home, (say to go on holiday plus buy a car and build a conservatory, pay back credit card debt, loans etc), borrow about 100K and once the remorgage is in place move out and rent out the original house having purchased a new home. The benefit being that the interest on the original house can be offset against rental income.


Can't see why not - but how are you going to buy property no.2?


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## Bronte (20 Dec 2007)

The reason I'm asking is that I've noticed that a lot of people are remortgaging more than once up to the equity levels in their homes. (PPR) These loans used to be restricted to doing up the house but it seems nowadays they go to pay off lifestyle spending. I was wondering what happens in the scenario if you had to move house how the revenue can keep track of all this. 
Glenbhoy - not sure what you mean, but would purchase second home from savings?


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## Stifster (20 Dec 2007)

Bronte said:


> The reason I'm asking is that I've noticed that a lot of people are remortgaging more than once up to the equity levels in their homes. (PPR) These loans used to be restricted to doing up the house but it seems nowadays they go to pay off lifestyle spending. I was wondering what happens in the scenario if you had to move house how the revenue can keep track of all this.
> Glenbhoy - not sure what you mean, but would purchase second home from savings?


 
The revenue could audit you/ask for proof of the improvements etc

No you can't remortgage to the hilt and then set off the interest against the rental income.

see recently 





> 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.


http://www.askaboutmoney.com/showpost.php?p=543296&postcount=2http://www.askaboutmoney.com/showthread.php?p=543346


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## ClubMan (20 Dec 2007)

Bronte said:


> This comes up from time to time on AAM.  Can you remortgage your home, (say to go on holiday plus buy a car and build a conservatory, pay back credit card debt, loans etc), borrow about 100K and once the remorgage is in place move out and rent out the original house having purchased a new home. The benefit being that the interest on the original house can be offset against rental income.


No - as per the previous post and linked post.


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## csirl (20 Dec 2007)

> I was wondering what happens in the scenario if you had to move house how the revenue can keep track of all this.


 
Revenue collect stamp duty, so they know when you purchase a new house.

The people you rent to get tax relief on rental income, therefore Revenue will find out when they seek it. (PRTB will also find out at this time).

Revenue has the address of all employees on file, so they know when new residents move into your address. 

If someone has two houses (see stamp duty above) then obviously only 1 can be PPR - by default the other is an investment. Seemingly "vacant" houses (in cases where either renters or owners use other address as PPR) tend to attract Revenues attention.

Everything is computerised nowdays and automatically cross referenced by Revenue "profiling" computers, so they always catch up with this sort of stuff.


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## ClubMan (20 Dec 2007)

And many taxes are self assessed/declared so obviously there is scope for illegal evasion but nobody would recommend this as a prudent approach to tax/financial planning.


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## Bronte (21 Dec 2007)

Well I would imagine that there are many many people who have got top ups and said they were doing up the house and instead bought a car, I still can't see how revenue would be able to see what happened the money, I realise if they did an audit they could ask you for receipts, but you only have to keep receipts for six years and I'm sure most people don't even keep receipts for that long.  If it came to it the revenue would have to call to your house to see what work was done but they wouldn't be able to tell when a kitchen was installed or a floor laid or a conservatory built.  
Just to be clear I'm not advocating tax evasion.


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## ClubMan (21 Dec 2007)

Yes - self assessed/declaration taxation systems are open to abuse. I'm sure that there are some people who abuse them. Hopefully some (many) of them get caught out sooner or later.


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