moving to refurbished house with mortgage from 1st also with mortgage

I have now renovated an old bungalow and had to take out large mortgage to do so, I already had a small mortgage on current house ie PPR and got interest relief on that. I was going to sell 1st house and pay off all debts. BUT with the market slowing I now have 2 pproperties. Can I now declare the 2nd house my ppr and get interest relief on the larger mortgage.

Or is there any other work round. I have lived in 1st house since 2000, bought second hosue 2 years ago and because of unbelievable hassle it has taken over 2 years to get it fit for living in.

Help


noah

NOAH said:

y off all debts. BUT with the market slowing I now have 2 pproperties. Can I now declasre the 2nd house my ppr and get interest relief on the larger mortgage.

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Only if you move into it and live in it as your PPR. Otherwise no but you could offset any interest against rental income.

Or is there any other work round.

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Not that I can see.

Thank you for quick reply. I have moved to 2nd house, 2 months ago, In was led to believe the 1st house would sell quickly!!

If I decide to rent out 1st house will I then become liable for CGT when I evnetually sell the 1st house?

A bit clueless when it comes to tax so any help appreciated.

thank you


noah

If you have moved into the second house then you can claim owner occupier mortgage interest tax relief on the mortgage for that property. You can claim the remaining c. 5 years of your "FTB" relief period on the second property/mortgage. You must stop claiming it on the first mortgage/property though. If you rent the property out then you can offset interest on the mortgage outstanding on the first property against rental income when doing your rental income tax return. If you rent the first property out within 2 years of purchase then you will be liable for a clawback of stamp duty. If you don't sell the first house within 12 months of vacating it as your PPR then some portion of any eventual resale gain will be assessable for CGT.

If you are clueless about tax then read as much as you can here and maybe get professional advice. See the Property Investment forum and FAQ for example.

Thanks again. I will learn the ropes myself as I keep getting conflicting advice. I bought second house more than 2 years ago but could not move in as it was not possible to live in it due to flooding. I had to wait until the local council hooked us up to the main sewer and the council kept changing the dates. It eventuallu was done Feb 2007!! It was supposed to be end of '05, the '06. I was doing renovations at the same time and that was a nightmare as well. I was fed BS all along the way.

The end of it is that I was more than 2 years in buying house and moving in. I moved in 31 Oct 07. I am now concerned I will be liable for a CGT through no fault of my own.

noah

NOAH said:

I am now concerned I will be liable for a CGT through no fault of my own.

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You mean on property 2 if/when you eventually sell it for a gain having lived in it from now? I doubt it but that is a totally non professional opinion.

I am tired.

I mean property no 1, ie the first hsoue I had when I moved back from UK and I was not a FTB either. So I lived in house no 1 from 2001 to 2007 but bought house 2 in March 2005. All the work was going to take one year max but council would not budge. Only put in sewer when we objected to a new development at rear of propeties etc etc. Its a saga.

Can one quote extenuating circumstances when applying the 2 year rule?

noah

Sorry - I'm confused now. The 2 year rule relates to renting out a former PPR within 2 years of purchase leading to a clawback of SD. This has nothing to do with CGT. If you have a PPR and vacate it to move to another PPR then if you don't sell the former i within 12 months then some portion of any eventual resale gain will be assessable for CGT. I thought you were asking if having the second property for two years while doing it up and then moving into it as your PPR (while you were living in the first property as your PPR in the meantime) might give rise to some CGT liability on selling the second property in the future. I'm not sure but I suspect not. I'm not sure what your FTB status has to do with any of this.

If in doubt get professional advice.