Changing type of mortgage (from investment to PPR residence)

[mobilegirl]

I recently got mortgage approval to buy a new house 250k (capital & interest repayment) and got an investment mortgage (200k equity release interest-only) on my existing house to fund the additional money required for the purchase of the new house.

The plan was to rent my PPR and move into the new house.

However now after thinking through the stamp duty issues (my house has been my PPR for 4 years), I am thinking of remaining in my existing house for another year so I won't be liable for stamp duty when I rent it out and move into my new place.

However I've just had a thought - since I originally went to the bank asking for the equity release on the 1st house to fund the purchase of the new PPR, will the bank have a problem with me changing the purpose of my equity release mortgage, i.e. that it actually won't be an investment property for the first year?

Also how does this affect interest relief for both mortgages and does it complicate things in relation to my TRS?

It has occurred to me that I might even be better off remaining in the 1st house longer term and renting out the new house since it's not possible to write off the interest on the equity release mortgage (since it was borrowed to fund a purchase of a PPR)?

Any comments/advice would be appreciated, thanks!

 

[ClubMan]

However I've just had a thought - since I originally went to the bank asking for the equity release on the 1st house to fund the purchase of the new PPR, will the bank have a problem with me changing the purpose of my equity release mortgage, i.e. that it actually won't be an investment property for the first year?

You need to (a) read the terms & conditions of the loan agreement to see what it says about this and (b) contact the lender for clarification if necessary.

Also how does this affect interest relief for both mortgages and does it complicate things in relation to my TRS?

You can only claim TRS on one loan - the one used to purchase your PPR whichever that is at any particular point in time. If this changes then the mortgage on which the TRS is claimed and the amount that qualifies may change. It's up to you to inform Revenue of the relevant details.

It has occurred to me that I might even be better off remaining in the 1st house longer term and renting out the new house since it's not possible to write off the interest on the equity release mortgage (since it was borrowed to fund a purchase of a PPR)?

Similarly to the TRS issue only interest on loans used to purchase/renovate an investment property (no matter what property this loan might be secured on!) can be offset against rental income.