tax questions - what to do next?

[Mina]

No.1. If both spouses are high income earners, presumably it won't make any difference if ownership of a rental property is joint with a 50:50 share?

No.2. I have one rental property. The mortgage fixed term is up in a couple of months so I will be looking to remortgage. Is it worth reducing the mortgage at all (I pay interest only) or is it best to keep the mortgage close to rental income to minimise the difference (my investment is for capital growth, not income). Basically I have a very small mortgage on my main place of residence but I have a pre-agreed reserve that I can draw down any time. This would increase the mortgage on my home but on more favourable terms than a buy to let mortgage. I'm just wondering if there are any tax implications to increasing the mortgage on my home in exchange for reducing the mortgage significantly on the investment property.

No.3 Are repayment mortgages better tax wise than interest only? What would you go for?



Hope someone can help.
Thanks!

[Tax Accountant]

No.1. If both spouses are high income earners, presumably it won't make any difference if ownership of a rental property is joint with a 50:50 share?

No.2. I have one rental property. The mortgage fixed term is up in a couple of months so I will be looking to remortgage. Is it worth reducing the mortgage at all (I pay interest only) or is it best to keep the mortgage close to rental income to minimise the difference (my investment is for capital growth, not income). Basically I have a very small mortgage on my main place of residence but I have a pre-agreed reserve that I can draw down any time. This would increase the mortgage on my home but on more favourable terms than a buy to let mortgage. I'm just wondering if there are any tax implications to increasing the mortgage on my home in exchange for reducing the mortgage significantly on the investment property.

No.3 Are repayment mortgages better tax wise than interest only? What would you go for?

Hope someone can help.
Thanks!

(1) If both higher rate tax payers, ownership doesn't make any difference as you state.

(2) If you increase the loan on your main residence, or borrow the money from any where else to reduce the loan on the let property, you will still be able to claim the interest against rental income. Basically, you are replacing one loan with another. If the original loan which is being replaced is a qualifying loan, the replacement loan will also qualify. Therefore, if you can replace the BTL loan with a cheaper one elsewhere, you should do so.

(3) Largely depends on individual preferences and cashflow situation. If you keep your repayments low by paying interest only, what would you do with the spare cash? I personally prefer to go for repayment loans. The more interest you pay, the less tax you pay. But you must remember that you are paying £1 more interest in the first place for the benefit of saving 22p (40p if higher rate taxpayer) in tax. Therefore, you are still out of pocket at the end of the day.

Ramnik

[Mina]

Thank you so much for your advice! It has really helped.

[Tax Accountant]

Thank you so much for your advice! It has really helped.
You are welcome.
If possible try to pay it forward by helping someone else when you have no obligation to do so.

Ramnik