Using main residence to raise mortgage to fund joint buy-to-let purchase

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    Using main residence to raise mortgage to fund joint buy-to-let purchase

    My wife and I have a small remaining mortgage on our main residence (she is a basic rate tax payer with plenty of headroom; I am a 45% payer) leaving about 90% unused valuation. We are looking to buy a 50% share in a flat on the coast with my brother which we can rent out at about £1000 pcm (ie £500 pcm each). We were going to put our half in my wife's name so that we are only subject to basic rate tax on any profits. My basic question is if we borrow an extra, say £140k, secured on our jointly owned main residence to go towards a (50% share of a) flat that is costing us (technically my wife only) £125k purchase price + £5k Stamp Duty and £10k refurb, how much of the £140k additional mortgage borrowing can my wife get a 20% tax credit for against the tax payable on her rental income on her share of the new flat? Presumably it is limited to a maximum of £125k. But is there a problem if the mortgage interest on the additional loan is paid jointly by the 2 of us?

    You need an accountant (or family solicitor) to work out the best structure for this.
    You might find that changing the ownership structure of your residential home produces a more tax effective mechanism.
    But the calculation is subject to all kinds of variables and it's not easy to give an off the cut answer - and it might be that the extra complication costs more than can be saved in the short term.

    Without a proper structure in place, your wife would be able to use 50% of the interest against the income (subject to the new restriction being phased in).
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


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