Getting loan on investment property to fund main residence renovations

[kevinf]

Hi
My friend and his family are moving into his father's house (NewHouse) with the idea of doing a large extension. They have a small mortgage on their current property (OldHouse) which they intend to rent.
They plan to borrow 100K against the OldHouse to use for the extension to the NewHouse (i.e. their new main residence). He thinks (and his banker friend has told him) that he can put the rental income on the OldHouser against the interest on the 100K. I said he can do this but it is illegal because the 100K was not used to renovate the OldHouse.
Can somebody advise me on the legalities of this ?

Thanks in advance.

 

[ClubMan]

He and his banker friend are wrong and you are right. He can claim owner occupier mortgage interest relief on the topup used to renovate the PPR though. What matters is what the borrowed money is used for and not what asset it is secured on.

 

[kevinf]

Thank you - much appreciated.