Investment Property

D

DM72

Guest
Does anyone have information onthe criteria that need to be met to release equity on a property to purchase another? I would like to keep my existing house and rent it out and buy a new house to live in, I have paid off approximately 50% of the current value of my property.
 
I think you shouldn't have a problem with regard to equity as you have 50% available on your PPR.

You should get a local estate agent to determine the likely rent you could expect. They'ill put it in writing for you. This can be used when negotiating your mortgage with your mortgage provider.

One thing which you have to be aware of is that if you rent your original house and move into the newly purchased property, you will not be entitled to offset mortgage interest against your rental income when calculating your tax liability.

If you do it the other way round and simply buy an investment property and rent it out, then you will be able to offset the investment mortgage interest against your rental income.

It's something you will have to factor into your deliberations
 
Thanks, hmm, I thought you could offset the tax as it's not your primary residence..... will have to look into that one a bit more!
 
Interest on a loan used to buy/renovate an investment property can be offset against rental income even if the loan is secured against another property (e.g. your PPR). Obviously you can't offset interest and claim owner occupier mortgage interest relief on the same interest.
 
DM72 said:
Thanks, hmm, I thought you could offset the tax as it's not your primary residence..... will have to look into that one a bit more!
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You say you intend to move into the new house which you ar going to purchase. In that case the new house becomes your PPR. YOu didin't raise a mortgage to buy the old house you will now rent out, therefore you cannot offset the new house mortgage interest against the old house rental income.

As far as I know!
 
Don, you're correct. But not all of it. The interest on the equity release money can't be used to offset against rental income.

Also - after 1 year renting you lose the CGT exemption on the original PDH - on a pro rata basis. That could really hurt though, if your house has shot up in value since you bought it.

Does anyone else think these rules are crazily weighted to assist investors while punishing home-owners??
 
Meccano said:
Does anyone else think these rules are crazily weighted to assist investors while punishing home-owners??
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No - can you summarise why you think that they are if that's the case?
 
Meccano said:
Don, you're correct. But not all of it. The interest on the equity release money can't be used to offset against rental income.
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Meccano, could you clarify this a bit please?

It doesn't matter what property you raise a mortgage on, it's how you use the money raised from the mortgage. If the mortgage (this could be equity release on an existing property)is used to purchase a property which is then rented out then you can offset the rental income on that property against the mortgage interest.
 
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