Mortgage on Rental Property

L

Lobby

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I see from other posts that you can write off the interest on a loan that is used for an investment property irrespective of where that loan is sourced.

My question is, how do you determine which part of the loan is for that property? Specifically, I lived in Clonsilla, had a mortgage taken out in 1998, had only about 25,000 outstanding in 2004 when I moved down the country. However, I retained the house in Clonsilla, and re-mortgaged to buy a new PPR. Some of the loan is taken against Clonsilla and some is against my current PPR. Am I only allowed claim interest on the 25,000 that was outstanding in Clonsilla before I re-mortgaged?
 
Lobby said:
I see from other posts that you can write off the interest on a loan that is used for an investment property irrespective of where that loan is sourced.

My question is, how do you determine which part of the loan is for that property? Specifically, I lived in Clonsilla, had a mortgage taken out in 1998, had only about 25,000 outstanding in 2004 when I moved down the country. However, I retained the house in Clonsilla, and re-mortgaged to buy a new PPR. Some of the loan is taken against Clonsilla and some is against my current PPR. Am I only allowed claim interest on the 25,000 that was outstanding in Clonsilla before I re-mortgaged?
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Yes, only the interest on 25,000 (less the part of this that has been paid off since 04). Basically the finance cost. The re-mortgage was for equity release which can't be written off. If it was for building an extension say then you could write it off.
 
Can it not be argued that my repayments in Clonsilla were against my PPR mortgage, and by moving home and renting out Clonsilla, I was entitled to "move my equity" to my new PPR and re-mortgage Clonsilla, i.e. am I not entitled to leave as little outstanding on my own home, and place the mortgage on Clonsilla.

It seems to discriminate from the case that if I had only a PPR at the moment, and bought an investment property today (with a mortgage), I could then claim the interest in that scenario.

Should both not be entitled to be the same, or what is the justification for the difference?
 
You can argue what you like, the position as stated by robd is the correct one, as set out in law and also in various Revenue publications.

You may be correct that this is discrimination. However, this doesn't change anything, unless of course you feel sufficiently motivated to challenge this law in the courts.
 
Nah, I understood fairly much the situation before asking, and just wanted to clarify. I suppose I was hoping that if there wasn't a logical justification then maybe I was wrong!

But then again, logic and the revenue don't always go hand in hand.

Thanks!
 
You can only offset mortgage interest against rental income if the mortgage was used for the purchase/renovation/repair of an investment property. Only 25k was used for this purpose so this is all you can obtain relief on. As the previous poster has said, if you released equity to upgrade Clonsilla then this could also be taken into account.
 
Not sure if this is on topic but...If someone remortgages their PPR in order to buy an investment property, what happens if they decide to sell PPR? Can the mortgage be transferred to the investment property before the sale of the PPR and can it still be offset against rental income?
 
I'd say yes once the mortgage on the PPR was originally used for purchase of an investment property. The problem might be the loan to value on the investment property, would there be enough free equity on the investment property to transfer the mortgage from the PPR.
Can any tax expert clarify?
 
NorfBank said:
The problem might be the loan to value on the investment property, would there be enough free equity on the investment property to transfer the mortgage from the PPR.
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Especially if, as is often recommended, investors take out interest only mortgages on buy to let properties in order to maximise their ability to write off interest against rental income.
 
It's a hypothetical question so I don't have answers with regard to equity in investment property etc. It just occurred to me when reading the first post that, as Clubman said, lots of people are probably in this position today and it's a scary prospect if the mortgage can't be transferred! It was something we considered a year or so ago but at that time too many questions remained unanswered for me to go ahead. Thankfully most have been answered due to discussion on AAM, which allowed me to ask relevant questions of my advisor.

As NorfBank says most investment properties these days wouldn't really qualify for equity release on the scale that is needed.
 
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