Expences -> Repayment or interest mortgage as expences.

[BusyLandlord]

Is it Ok to move to a repayment mortgage for rented property? With the interest only mortgage I can use that as expences & not pay tax on it. The Isa endownment I pay tax on. With a repayment mortgage can you claim the whole amount as expences or can you claim part of it as expences?

[TaxationPete]

You can only the claim the interest element of a mortgage associated to a rental property. No capital payment can be claimed. Regards Peter

[BusyLandlord]

Thanks Pete for your feedback. So does that mean if I get a repayment mortgage then I need to ask the bank for the interest element of the repayment .

EG. Say repayment is £1000 a month then I need to calculate the interest payment of this which is £800. So can claim the £800 and pay tax on the £200.

Is this correct..????

Or should I not have a repayment mortgage at all and MUST have an interest only mortgage?

[TaxationPete]

As long as the provider has given permission for the rental use of the property then either mortgage can be claimed but as I said only the interest. The provider can provide and annual statment of the actual interest and you will need to calcualate and tract the interest rate and your capital sum and balance it up one a year. The Interest is tax deductable and the capital element is not used in your accounts and you paid tax on it when you earnt it. Regards Peter

[BusyLandlord]

thanks for this info.

[King_Maker]

If you have a mortgage on your own property, it is usually better to overpay this and have an IO (Interest Only) mortgage on the rented property.

Not only can you maximise your Income Tax relief, but you get a guaranteed rate of return of (say) 11.66% p.a. (assuming a mortgage rate of 7.00% and a 40% taxpayer).