Diesel

O fount of all knowledge Scoobynet I call thee (just before calling my accountant on Tuesday!)!!!

I'd love to release some of the equity I have in two rented properties [actually the second property is being rented out next week as it didnt sell in 4 months and we need sale or rental income to help get out of the tiny job relocation rental we are in]! I really need this equity to put down on buying a new main residence rather than maxing the 'home' mortgage whilst both the rental ones remain low-ish on LTV.

Trouble is, that although this would seem fair (the houses genuinely ARE rented out) I dont think the IR let you do it...???

Thanks for any advice!

MartinM

***not qualified to give financial advice***

I assume you mean you want to increase the mortgages on the rentals, but use the cash the mortgage company sends you for equity for your new main residence?

Can't see any problem and I also believe this is the standard way of raising cash from rental investments
- although you have raised extra money, you haven't sold anything, so I don't think there's any concept of CGT
- all you've done is taken out a loan - and you don't pay income tax for doing that!
- and I don't know of any other tax that would apply
...so I can't see the IR having any grounds to let/not let you do this

The only thing I recall, is that you can't claim that part of the interest you pay on the extra rental mortgages as an allowable expense, i.e. you can't offset it against the rental income to work out net rental profit

But I stand to be corrected...

***not qualified to give financial advice***

Vegescoob

Yes accountant must be source of correct advice. I have a friend who has several rented properties and I know he has released equity from them but I don't know the ins and outs ref IR.

Diesel

And there is the rub Martin... Really cant see a reason for doing it then as I can manage just about enough deposit on the new 'home' without doing that... Maybe that's what they call 'gearing'?

MartinM

If you have the option, then maybe it's called putting the rent up to cover all/most of the extra interest part

Each £1000 you increase the mortgage costs you £5 pm at 6% interest rate. So put up the rent up £20pm in each (when you've next got the chance) and you've completely covered £8K extra deposit straight away, or half covered £16K. Sounds relatively easy money to me....