Can you claim mortgage interest back in this situation?

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    Can you claim mortgage interest back in this situation?

    Just looking at a couple of good flats near to us for letting. My parents have a maintenance only level of mortgage left on their property and I'm thinking of asking them to borrow against their property so I can purchase the flat (still putting in 25% myself as cash). Obvious benefits been a bit of protection against rate rises as it wont be a BTL rated repayment.

    The question is under this arrangement can I still claim back the relief on the interest part of the loan?

    Are there any other complications that might arise from this arrangement? Other me defaulting and leaving my parent homeless?

    #2
    No, because the mortgage would not be on the rental property.

    Comment


      #3
      Originally posted by Snorkerz View Post
      No, because the mortgage would not be on the rental property.
      I don't think it has to be, as long as the loan is taken out for the sole purpose of buying the new property.

      I'm thinking of the days when it was common practice to buy using no/low interest credit cards. Even if the rates shot up to 20+%, the interest was still allowable.

      It's the same principal as raising £20k by remortgaging an existing BTL to fund the deposit to purchase another. The £20k is allowable on the new property even though the loan is for the old one.

      I'm a bit wary of the parent loan bit though. I think it would need to be meticulously documented as it sounds rather dubious. Maybe the tax questions board is more suitable.

      MODERATORS can this be transferred to tax questions please?

      Comment


        #4
        Originally posted by boletus View Post
        MODERATORS can this be transferred to tax questions please?
        Done, could you please use the ‘report post’ function in future, I may miss a message posted in a thread but reported posts cause e-mails to be sent, thanks.
        I also post as Mars_Mug when not moderating

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          #5
          The challenge here is that you are asking your parents to raise the maoney and give it to you, if they bought the rental property in their names using their personal assets as security I understand most accountants would be able to offset the interest element against THEIR taxes.

          I you buy it using their money and even if you pay the mortgage for them YOU will not be able to claim it.

          There would I imagine be a way around it if they were to lend you the money under a formal loan agreement and you paid them a commercial rate for the privilige, perhaps one of the more astute tax specialists could confirm that would be acceptable, and you could get the tax relief then as it would be their loan that enabled you to buy the property.
          CFA

          Comment


            #6
            Originally posted by cfaproperty View Post
            There would I imagine be a way around it if they were to lend you the money under a formal loan agreement and you paid them a commercial rate for the privilige, perhaps one of the more astute tax specialists could confirm that would be acceptable, and you could get the tax relief then as it would be their loan that enabled you to buy the property.
            As they are not a bank they are not entitled to make this offset.

            Your parents, however, if they own (a proportion of) the property are entitled to claim an interest deduction.

            Snorkerz's post above is both irrelevant and wrong.

            Comment


              #7
              Well, from post 3 onwards I consider myself duly corrected Fridaypassion - sorry that I misinformed you.

              Comment


                #8
                Interesting. The property I have in mind isnt really big enough to warrant bringing my parent "in" as such. I'd have to do some sums on the tax liability vs additional %. I guess its still going to be viable.

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