Short term mortgage to preserve ISA?
Discussion
I'm going to retire in a couple of years or so. I don't plan to stay in the area I currently live in, and plan to move elsewhere.
What I'd like to do is buy a house in the area I want to move to, and let it out until I retire. House prices are rising quite quickly there.
I can buy the house cash, but the money is tied up in an ISA. I could just cash in the ISA.
I think an interest only mortgage for 2 or 3 years - until I move and sell my current house - might be a way of keeping the ISA intact.
Is this viable, and would there be any CGT implications?
What I'd like to do is buy a house in the area I want to move to, and let it out until I retire. House prices are rising quite quickly there.
I can buy the house cash, but the money is tied up in an ISA. I could just cash in the ISA.
I think an interest only mortgage for 2 or 3 years - until I move and sell my current house - might be a way of keeping the ISA intact.
Is this viable, and would there be any CGT implications?
eldar said:
I'm going to retire in a couple of years or so. I don't plan to stay in the area I currently live in, and plan to move elsewhere.
What I'd like to do is buy a house in the area I want to move to, and let it out until I retire. House prices are rising quite quickly there.
I can buy the house cash, but the money is tied up in an ISA. I could just cash in the ISA.
I think an interest only mortgage for 2 or 3 years - until I move and sell my current house - might be a way of keeping the ISA intact.
Is this viable, and would there be any CGT implications?
It's viable depending on your age and income now and into retirement..........What I'd like to do is buy a house in the area I want to move to, and let it out until I retire. House prices are rising quite quickly there.
I can buy the house cash, but the money is tied up in an ISA. I could just cash in the ISA.
I think an interest only mortgage for 2 or 3 years - until I move and sell my current house - might be a way of keeping the ISA intact.
Is this viable, and would there be any CGT implications?
Sarnie said:
It's viable depending on your age and income now and into retirement..........
Certainly appears to be. I can borrow money for less that I get for my ISA! I'd always thought if it looks too good to be true, then it probably is. There has to be a catch somewhere, I just can't spot it. What am I missing?
nyt said:
If you have a mortgage then you can claim the interest paid against your tax due on the rental income.
But is your ISA actually going up by more than the 6ish percent that a BTL mortgage will want?
Not a BTL mortgage. Remortgaging my existing house at 1.65%, ISA is around 3 to 4%.But is your ISA actually going up by more than the 6ish percent that a BTL mortgage will want?
So, keep existing house and live in it. Buy new house and let it, rental income £1,000/month, pay £400 mortgage and loss of interest on deposit and retain ISA income. Sounds too much like free money!
Eldar,
We mostly use the cash/investment ISA wrapper to save or invest, and most of us save and invest in order to buy. Unless you have something more important than the home a few years down the line, why not consider the ISA objective successfully achieved?
You might be patting yourself on the back for a job well done instead of having the spectre of another mortgage (and more uncertainty from possible void periods etc and cost outgoings) around your neck? Consider this. What's more important, the peace of mind of having a retirement home without debt or a collection of annual ISAs? My gut instinct is that you're approaching the finishing line and this is more than just about nicking an extra percentage point here or a few hundred quid there. That's more the accumulation mentality, not the decumulation one.
Only you can decide. But run the numbers and if it looks right to sell and if it feels right to have a home free of debt, remember that the tax tail shouldn't wag the mission dog. Don't be an ISA magpie and lose more in other outgoings and peace of mind at this stage of life than you would gain by having a collection of tax baubles. In answer to your question, there is no CGT liability when selling an ISA but there might be tax to pay on rent income.
Edit: (Ok, thanks. It's 0600 or so and now I'm actually humming.. "There were ten cash ISA sitting on the wall, ten cash ISA sitting on the wall..").
We mostly use the cash/investment ISA wrapper to save or invest, and most of us save and invest in order to buy. Unless you have something more important than the home a few years down the line, why not consider the ISA objective successfully achieved?
You might be patting yourself on the back for a job well done instead of having the spectre of another mortgage (and more uncertainty from possible void periods etc and cost outgoings) around your neck? Consider this. What's more important, the peace of mind of having a retirement home without debt or a collection of annual ISAs? My gut instinct is that you're approaching the finishing line and this is more than just about nicking an extra percentage point here or a few hundred quid there. That's more the accumulation mentality, not the decumulation one.
Only you can decide. But run the numbers and if it looks right to sell and if it feels right to have a home free of debt, remember that the tax tail shouldn't wag the mission dog. Don't be an ISA magpie and lose more in other outgoings and peace of mind at this stage of life than you would gain by having a collection of tax baubles. In answer to your question, there is no CGT liability when selling an ISA but there might be tax to pay on rent income.
Edit: (Ok, thanks. It's 0600 or so and now I'm actually humming.. "There were ten cash ISA sitting on the wall, ten cash ISA sitting on the wall..").
Edited by Ginge R on Saturday 18th April 06:07
Ginge R said:
Eldar,
We mostly use the cash/investment ISA wrapper to save or invest, and most of us save and invest in order to buy. Unless you have something more important than the home a few years down the line, why not consider the ISA objective successfully achieved?
You might be patting yourself on the back for a job well done instead of having the spectre of another mortgage (and more uncertainty from possible void periods etc and cost outgoings) around your neck? Consider this. What's more important, the peace of mind of having a retirement home without debt or a collection of annual ISAs? My gut instinct is that you're approaching the finishing line and this is more than just about nicking an extra percentage point here or a few hundred quid there. That's more the accumulation mentality, not the decumulation one.
Only you can decide. But run the numbers and if it looks right to sell and if it feels right to have a home free of debt, remember that the tax tail shouldn't wag the mission dog. Don't be an ISA magpie and lose more in other outgoings and peace of mind at this stage of life than you would gain by having a collection of tax baubles. In answer to your question, there is no CGT liability when selling an ISA but there might be tax to pay on rent income.
Edit: (Ok, thanks. It's 0600 or so and now I'm actually humming.. "There were ten cash ISA sitting on the wall, ten cash ISA sitting on the wall..").
That is certainly good advice, and food for thought - thanks.We mostly use the cash/investment ISA wrapper to save or invest, and most of us save and invest in order to buy. Unless you have something more important than the home a few years down the line, why not consider the ISA objective successfully achieved?
You might be patting yourself on the back for a job well done instead of having the spectre of another mortgage (and more uncertainty from possible void periods etc and cost outgoings) around your neck? Consider this. What's more important, the peace of mind of having a retirement home without debt or a collection of annual ISAs? My gut instinct is that you're approaching the finishing line and this is more than just about nicking an extra percentage point here or a few hundred quid there. That's more the accumulation mentality, not the decumulation one.
Only you can decide. But run the numbers and if it looks right to sell and if it feels right to have a home free of debt, remember that the tax tail shouldn't wag the mission dog. Don't be an ISA magpie and lose more in other outgoings and peace of mind at this stage of life than you would gain by having a collection of tax baubles. In answer to your question, there is no CGT liability when selling an ISA but there might be tax to pay on rent income.
Edit: (Ok, thanks. It's 0600 or so and now I'm actually humming.. "There were ten cash ISA sitting on the wall, ten cash ISA sitting on the wall..").
Edited by Ginge R on Saturday 18th April 06:07
I've been rethinking the plans and rechecking the risks, mitigations and benefits. Another couple of days and I should have my plan finalised.
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