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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5115
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hello, Have a question regarding offseting residential mortgage

Customer Question


Have a question regarding offseting residential mortgage against BTL property:

We are purchasing a BTL property, with deposit raised through remortgage of current residential property. We understand that interest from this remortgage is offsetable against rental income.

Question: we want the debt re the BTL to remain constant as part of residential mortgage (i.e. like interest only). The mortgage on residential is repayment, so overall the debt decreases each month. Can we fix the proportion of debt relating to the BTL in our interest proportion calculations, so we are paying off the 'residential part' of the mortgage but not the amount raised for BTL. I.e. so when we are say down to last £200k mortgage (which was amount used for BTL), the whole residential interest is deductible against rental income (as the BTL deposit amount), or do we have to reduce the BTL debt in same proportion of repayment of overall mortgage?

Submitted: 4 years ago.
Category: Tax
Expert: replied 4 years ago.
Hello and welcome to the site. Thank you for your question.

If you are raising funds to purchase a BTL property and you are using £200k towards it then you could argue that interest applicable to the loan for BTL is calculated at a constant loan amount of £200k.

I hope this is helpful and and answers your question