Home For accounting professionals General accounting discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚

Mortgage Interest

JodieRJodieR Experienced MentorRegistered Posts: 1,002
My client has taken out a mortgage to purchase a rental property but has secured the mortgage on his own home (which he owns outright) instead of on the rental property. Will this affect how much of the mortgage interest he can claim in the rental accounts? I can't see that it will but I'd like to be sure about it.


  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    I'm pretty sure it qualifies - it was taken out in order to finance the rental property. I can't remember definitively though.

    From my ATT text book

    "mortgage interest is deductible when calculation property income provided the related borrowing was applied wholly and exclusively for the purposes of the lettings business."

    I dont think it matters which property the loan is secured on.
  • JodieRJodieR Experienced Mentor Registered Posts: 1,002
    Thanks :)
    Actually I'm remembering something from a CPD course now... was there not a case a while back where a man owned a shop and lived above it (or rented it out, I can't remember) and he'd taken out a large loan and said on the application form that the loan was for one part of the building/business and used it for the other and HMRC ended up disallowing the interest??

    In my case the mortgage was taken out on the day of the purchase for 95% of the purchase price so it's obvious that that is what it was used for so I hope it'll be fine. Might do a bit more digging though to read up on that case & if I remembered it correctly I'll make sure the money was allowed to be used to purchase a rental property.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    Monsoon is right. Makes no difference what property the loan is secured on, or indeed what the funds were actually spent on (if refinancing).

    The only real restriction is that the loan should not exceed the market value of the rental property when first let.
  • JodieRJodieR Experienced Mentor Registered Posts: 1,002
    brilliant, thanks dean (& jenni) :)
Sign In or Register to comment.