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Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.
Can I ask who advised you that you could avoid tax on rental income by having your parents pay the lender.
Are your parents contributing to the purchase price of the new house?
Forgetting the idea of paying the lender directly for now, would they be paying you a sum equal to a market rent? Would the mortgage interest you pay exceed the "rent" they pay you?
How much will the monthly interest be on the part of the mortgage used to buy the new house? Roughly.
So long as you can find enough expenses to cover the rent, there would be no tax to pay. However, as you say, the treatment of mortgage interest on let property will change over the three years from 6 April 2017.
I have to say that I've not come across a situation where the parents pay the interest so that the landlord doesn't have to pay income tax. I would have thought that HMRC would have a problem with this type of arrangement for obvious reasons and I would need to see a clearance letter from HMRC to convince me that it would work.
I hope this helps but let me know if you have any further questions.
That''s my point. HMRC wouldn't necessarily be told and that worries me. If it were me, I wouldn't do it.