Help, renting out family home

[amy1]

Help, we have just signed a contract on a house for us to moved into as it now suits our familys needs better and we would like to rent out our current family home. We have refinanced to cover both properties. Does any one know if you can (once our 1st house has been valued), if you can put the full amount of the valued amount on that house and have the capital growth that we have received on our 1st house on the our new house.
Help I know this situation is not terrible recommended, but it is not explained as to why it is so bad. Is doing something better than nothing. Or is this a major boo boo.
Thank to any one who can help with this one, the sooner the better. TA amy1

 

[DaleGG]

Hiya Amy!

I'm afraid that the tax office follow the money in a transaction like this and so they will not allow a full tax deduction on the loan over your former home.

They will allow the interest on the balance before refinancing as their argument is that the rest relates to your new home.

Bye the way, I would arrange for a very high valuation on your old home for CGT purposes as the new(ish) rules mean that the tax office will exempt the value up to the time that the house ceased to be your PPOR.

Good luck

Dale