Refinance Rental PropertyFunding of rental properties
Where the initial credit taken out to purchase the property was 300,000, the full amount of interest payable on such credit would be subject to taxation. Now let's say the property is valued at just one mn and you refinance the credit up to 600,000 and use the excess to cut your personal mortgages.
Given that the total amount to which you can apply for discharge is 425,000, you will only receive an interest subsidy on 425/600 of the interest you pay. At the time you began renting the property the value of the property was 700,000 and as this is higher than the 425,000 pounds given for its purchase and improvement, this is now the full amount of the credit on which interest facilities can be used.
If you have more than one property in the rental industry, it is possible to combine the item for all different objects to calculate the maximal amount of credit on which interest subsidies can be used. As a result, the loan limits on which the landlord may benefit from interest rate subsidies are £425,000 for property 1 and £500,000 for property 2, totalling £925,000.
When the first property is re-funded up to 600,000 then the aggregate amount of loan is 900,000 pounds which is less than the ceiling of 925,000 pounds and therefore the full interest amount for all loan is considered for discharge. However, this happens despite the fact that the overall debt of property 1 exceeds the highest amount that would be considered for discharge in the case of an independent property.