What is the status of loan interest deduction (against rental income) following a remortgage?

stig · Postby **stig** » Mon Sep 01, 2003 1:29 am

In 1989 I purchased a flat for 52K with a mortgage of 40K (ie a 12K cash deposit).

Some years later I rented it out and claimed the mortgage interest as a deduction against rental income.

Last year I remortgaged the flat to raise 60K.

Can I claim any of the interest on this new loan as a deduction against rental income?

If so am I limited to the interest on the amount covering the original loan used to purchase the property?

Or can I claim interest on the amount up to the original purchase price of the property?

Nigel Lord · Postby **Nigel Lord** » Mon Sep 01, 2003 1:36 am

Stig

Interest relief will be restricted to the amount of the new loan used to replace the existing loan, or used to improve/maintain the property.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk

stig · Postby **stig** » Mon Sep 01, 2003 1:40 am

Nigel

Thanks for the reply. I have been browsing the posts on this site and for a horrible moment thought that by remortgaging I had removed my rights to interest relief altogether.

Stig

stig · Postby **stig** » Mon Sep 01, 2003 1:51 am

Nigel

The additional funds raised from the remortgage were partially used to extend the term of the lease on the property. Does this count as an improvement and would the interest on this component be eligible for use as a deduction?

Thanks

Stig

Nigel Lord · Postby **Nigel Lord** » Mon Sep 01, 2003 1:54 am

Stig

The cost of financing the increase in the lease is a qualifying purpose and therefore interest is allowable on this element.

Nigel Lord
nigel@lordassociates.co.uk

stig · Postby **stig** » Mon Sep 01, 2003 1:56 am

Nigel

A result!

Thanks

Stig

AlanRob · Postby **AlanRob** » Tue Sep 30, 2003 3:42 am

Nigel

An interesting discussion for me - thanks! One further question though. What if the equity released by remortgaging is used to buy another property for rental? Does it then become deductible from interest on the other property? Is there some way it can become deductible?

Thanks.