Re-mortgaging a Rental Property

H

Help999

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I am planning to re-mortgage a rental property to raise 200K to buy a site.

My question is: can I offset the motgage interest on the 200K against rental income bearing in mind that the money raised by re-mortaging is being used to buy a site?
 
All interest paid while contruction goes on will be a cost of consruction and you will only receive benefit if you eventally sell

Only interest after the new site has become a rental property would be allowed as a deduction against rental income

If you intend using the site to build and then re-sell all interest will become part of the construction costs for your CGT liability

If you are intending on building and re-selling you should get professional advice on how to structure the project

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Thanks for the resopnse Stuart but can I clarify my query a little:

My plan is to buy a site and build a house which will become my own residence (Property A) - I do not ever plan to rent or sell this house once it is complete.

To fund this self build project I need a 250K mortgage.

I have rental property (Property B) which is fully paid for i.e. no mortgage.

What I want to do is re-mortgage this rental property (Property B) and to use the cash to fund the self build of Property A. If I do this will I be permitted by Revenue to offset the mortgage interest against the rental income derived from Property B.

Bearring in mind that the money raised by remortaging Property B has been used for building Property A and not for actually buying or improving the rental property B.
 
help999 said:
What I want to do is re-mortgage this rental property (Property B) and to use the cash to fund the self build of Property A. If I do this will I be permitted by Revenue to offset the mortgage interest against the rental income derived from Property B.
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No - you can only offset interest on a mortgage used to buy or renovate a rental property against rental income from that property.
 
Thanks very much for clearing that one up but it does seem unfair. If I had used a mortgage to buy the rental property (Property A) in the first place I would now have the cash for the self build of Property B and be able to offset rental income on A against mortgage interest on A.

Will I ever manage to get to grips with all these tax laws!!

It seems that I got the funding of the rental property totally wrong and now will not get any tax relief for the duartion that I hold the rental property just because I took a mortgage out later rather than at initial purchase stage.

Winge , winge.....

Any tax relief suggestions for mortgage and small time landlord welcome.
 
Property Investment FAQ's are not accessible - perhaps it's because the site is moving?

So glad Help999 posted this thread - we have just approached the bank to request the transfer of the mortgage on our home to an investment property we own outright in order to deduct the mortgage interest from the rental income! Had no idea this was not possible - we also wouldn't have paid in full for the investment property had we known this was the situation.

Perhaps a lesson for everyone here thinking of getting into property investment - get good advice, particularly on tax issues, before you buy!
 
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