Buy to let & Home Mortgage Balance

[Kevin]

I have a €75k mortgage on a house valued at €200k. My parents are giving me a site to build on. I would like to rent out my existing property and move into the new house when built.

To reduce the amount of tax I'll have to pay on the rental property I'd like to make that the largest mortgage, i.e. I'll only have to pay tax on RENT COLLECTED - MORTGAGE INTEREST REPAYMENT. Is this possible... e.g. can I get the €75k mortgage increased to €150k for the rental property and just take out a €50k mortgage for the new house build?

If I have a fixed rate on my €75 mortgage will thhis have any implication, i.e. will it stop me from increasing it to €150? Thanks for any suggestions.

 

[Helen]

Hi Kevin,

You can only offset interest on borrowings used in the "construction, purchase or repair" of the rental property. As you would be increasing your borrowings to build another property, the interest on the extra amount would not be allowable as tax relief against the rental income.
Check out revenue leaflet IT70 for more information

Helen

 

[Sarah W]

No, you can only offset interest on the mortgage monies that were originally used to "buy, renovate or improve" the property therefore you would only to able to offset the interest on the current €75,000 balance.

And before you ask - there is no way around this!

Sarah

www.rea.ie

 

[Sarah W]

Snap!