Take out mortgage on rental property

Hi azerty

Your mistake is quite common.

The rule is simple enough: You are allowed to set interest on a loan taken out to buy or to improve a rental property.

It is the purpose of the loan which decides whether the interest is allowable or not.

So if you remortgage a rental property to buy a family home, the interest is not allowed.

However, if you remortgage your family home to buy a rental property, then the interest would be allowed.

Brendan
 
Brendan Burgess said:
However, if you remortgage your family home to buy a rental property, then the interest would be allowed.
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While true, that's not really an option anymore though is it?

No mainstream bank will remortgage a PPR to allow you to purchase a rental. And those that had been doing it (like ICS) have very high rates now so you would be incurring a huge cost to claim an interest expense
 
Brendan Burgess said:
Hi azerty

Your mistake is quite common.

The rule is simple enough: You are allowed to set interest on a loan taken out to buy or to improve a rental property.

It is the purpose of the loan which decides whether the interest is allowable or not.

So if you remortgage a rental property to buy a family home, the interest is not allowed.

However, if you remortgage your family home to buy a rental property, then the interest would be allowed.

Brendan
Click to expand...
Would that mean that if I planned to buy another rental property I could get the mortgage on the existing rental property I have and then use the funds to purchase another, therefore eligible for the interest relief on that mortgage once it was rented out?
 
Yes, if you remortgage a mortgage-free property to buy an investment, the interest would be an allowable deduction.

But as OKGo has pointed out, you will probably not get such a mortgage.

Brendan
 
Brendan Burgess said:
Yes, if you remortgage a mortgage-free property to buy an investment, the interest would be an allowable deduction.

But as OKGo has pointed out, you will probably not get such a mortgage.

Brendan
Click to expand...
So no bank would effectively do this? Even if Im currently mortgage free on PPR as well?
 
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