Mortage Interest Writeoff..

Hi,

I'm living in my principal residence (prop #1) - with a small mortage.... Assume I buy a second property (prop#2) - which would then become my principal residence. Prop #1 would then become an investment prop...
Can I remortage prop #1 to buy prop #2 allowing me to write off mortage interest on rental income..?

Assume the same bank holds both deeds and prop #2 is mortgage free.

1) Would banks do this ?
2) Will revenue accept this ?

Thanks for any comments.

No, you can't.
Revenue will look at the purpose of the loan, rather than which property it is secured against. Only funds used to purchase the investment property will be deductable.

I don't know about the banks, but Revenue are quite specific that only money used for the purchase, repair or improvement of the rented house can be written off (at a rate of 75% of interest paid) against the rent. Revenue does not care what security the banks have for their mortgages, only what the money was used for. If you do remortgage prop #1 then only the proportion of that mortgage that is used to pay off the old mortgage is allowable.
Sybil