Offsetting mortgage payments against rental income

[joboy]

I want to buy a rental property with capital borrowed using my main home as collateral. Can I offset the interest on this mortgage against the tax on the rental income or does the borrowed money have to be against the house that I am renting out ? I am a normal PAYE taxpayer.

Thanks, Jo

[Instinctive]

The money could be borrowed against any property, so long as it is used to buy or improve the rented property.

It needs to be secured on the rented property only in cases where a property is already owned and let and it is remortgaged to release equity for personal purposes. In these cases, the total new mortgae should not exceed the value of the property at the time when it first started being let.

Ramnik

[King_Maker]

This is an old "myth", and is incorrect.

Where there is loan involved, it is not relevant which property it is secured against (or whether it is secured at all), but the purpose of the loan. If it is to purchase a rental property or to fund improvements etc, then the interest can be deducted from rental profits.

As Ramnik says, re-financing of the Capital Indtroduce a/c is a different issue.