MORTGAGING RESIDENTIAL PROPERTY TO FUND LETTING

[ACBC]

We have mortgaged our existing property (in which we live) to fund the purchase of the property we will retire into. In the short term (one to two years) we will rent the new property.

Can the interest on the mortgage be set against the rental income? The mortgage is actually greater than the cost of the new property - the property plus purchase expenses are 80% of the mortgage - can I offset 80%?

From reading other topics it would seem so, but this exact circumstance does not seem to be covered.

[section 44]

Yes.

Presumably when you say:

We have mortgaged our existing property (in which we live) to fund the purchase of the property

You mean that monies were advanced to you by the lender and that those monies were used to pay the purchase price on the new property (I appreciate that this may seem pedantic but it’s the key point and something which often gets confused in questions posted here).

[King_Maker]

It would appear that 80% of the interest should be allowable.