Mixing rent and mortgage on same mortgage for two houses?

Question

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Before I go talk to a proper accountant type person, I have a reasonably specific Q about dealing with mortgage interest for two different properties on the same mortgage. If one is my primary residence, and the other a property I let out, can I just apprortion the interest in a pro-rated fashion when claiming for the rented property?

I would like to understand how the finances would work when comparing renting vs buying, assuming I need to obtain additional living space in another location.

Suppose I have a 100k mortgage,and increase it against the vaue of the property to generate another 100k with which I then buy a property at say

150k (assuming I have 50k in cash). Can I claim 50% of the interest against the rental property, or would the tax man say 'no that mortgage is for the first property so you cant claim any of it'?. Or I would I be better getting a second mortgage for the first property of 150K and using my 50k cash to pay down the mortgage on my principal residence? That way I'd have 150k of interest to offset against the mortgage used for the rental.

I could also rent the second property instead of buying, but I need to know what the financial difference would be between buying it, or renting it and then sub-renting it in order to understand the risks and rewards of each.

Ronald Raygun · Accepted Answer

Yes, if it's an interest-only loan. If it's a repayment loan, you can do even better, by changing the apportioning in such a way as to keep the rental part of the loan fixed, while reducing only the balance on the private house. That way you maximise your tax relief.

Yes you could and no he couldn't. What counts for the purpose of being allowed to set the interest against rental income is that the purpose of the borrowing was to enable the purchase of the rental property. That would clearly be the case here in exactly the same way as if you went out and took a BTL loan (which would be more expensive). It doesn't matter what property, if any, the loan is secured against.

jameshamilton777 · Answer

GASP!

You mean to say that all those 1000s of posts you've made talking up the housing market were acually because you are a vested interest, with multiple properties????

I would never have guessed that, not in a million years!

Daytona · Answer

There's a comprehensive overview from an accountant landlord here -  Daytona

Tumbleweed · Answer

Not at all, relative needs accomm for a few years, is fed up with being booted out of rentals, so either I buy a place and they stay there, or I rent a place and they stay therem(with the hassle of me subletting, and if thats allowed). I need to know the costs each way,and can then balance that against the risks, one of which is a HPC.

But I freely state I do have one house/mortgage at the moment, just like

99.9% of all the people who rabbit on about a HPC including you, probably. :-)

And today's genuine and very special offer, 5 to a charity if you can find a single post from me 'talking up the housing market'.

And how about 5 for me, for every prediction re a housing crash that hasn't come true within say 6 months. Then I certainly wouldnt need a mortgage!

Tumbleweed · Answer

Cheers will check it out.

Mixing rent and mortgage on same mortgage for two houses?

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