Q: I am looking for a house to buy and rent. Im going to take out a mortgage to buy to do this. What I would like to know is, is it better to have an interest only or a repayment of a mortgage tax standpoint?
I understand that you can rent a house and claim on your tax return for the interest you pay on your mortgage. My dad told me you can only claim tax relief on the Interest on your mortgage only if the mortgage on an Interest only basis. Can someone confirm whether my father was right or wrong on this? and can anyone confirm whether tax consequences to having an interest only or repayment mortgage or that it makes no difference from the standpoint of the tax authorities of view.
(I am a PAYE basic rate tax payer and this makes no difference and I do not fully tax currently.)
A:The smaller the mortgage, the less tax interest payments you can offset against the tax. So, you have an option of pocketing the rent before paying down the mortgage.
But then again, will the rent be higher than an interest only mortgage? The statistics say not for new entrants.
A:There are far more important things to worry about than this if you are thinking aout starting a property rental business, particularly one financed with borrowed money.
Do void periods, bad debts, repairs, redecoration, legal fees,insurance, agents fees, costs of evicting bad tenants, possible (likely?) rises in interest rates and possible falls in property values figure in your business plan?
A:You get the tax relief on the interest so it doesn't matter repayment or IO as far as the tax is concerned.
As far as why you are worrying about it, that's a whole new ball game as they say.
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