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Readers' Forum
Replies to Queries — 3
A secured letting
A recent article in a tax magazine gave the following example. A residential property worth £300,000 with a £100,0000 mortgage is re-mortgaged for £250,000 to buy a further property to live in, but the old property is let. As the open market value of the property at the start of the let is £300,000, then all the interest would be allowable against rental income, as the 'notional' capital account would not be overdrawn.
Readers' Forum
Replies to Queries — 3
A secured letting
A recent article in a tax magazine gave the following example. A residential property worth £300,000 with a £100,0000 mortgage is re-mortgaged for £250,000 to buy a further property to live in, but the old property is let. As the open market value of the property at the start of the let is £300,000, then all the interest would be allowable against rental income, as the 'notional' capital account would not be overdrawn.
Similarly, if an existing rented property is re-financed to the original mortgage e.g. £100,000 borrowed, £50,000 paid off, but the owner then borrowed back £50,000, then this interest is also allowable even if the money is applied for a private purpose.
I would be interested in readers' comments on this problem.
(Query T16,510)
