Tax liability on equity released by re-mortgage?

[iDrive]

Hi

If I remortgage my home and take out a larger loan, releasing some of the equity, how is the released money taxed?

One of us is a lower rate tax payer, the other a higher rate, we jointly own the property and it is the house we live in (i.e. not rental or commercial etc)

Cheers!

[bigunit00]

iDrive said:

Hi

If I remortgage my home and take out a larger loan, releasing some of the equity, how is the released money taxed?

One of us is a lower rate tax payer, the other a higher rate, we jointly own the property and it is the house we live in (i.e. not rental or commercial etc)

Cheers!

Simple. It isn't taxed. You just take on more debt which needs to be serviced,

[Eric Mc]

If you have released equity and taken on a larger loan - what's the point?

[bigunit00]

Eric Mc said:

If you have released equity and taken on a larger loan - what's the point?

To use the cash for something else?

[Countdown]

iDrive said:

Hi

If I remortgage my home and take out a larger loan, releasing some of the equity, how is the released money taxed?

One of us is a lower rate tax payer, the other a higher rate, we jointly own the property and it is the house we live in (i.e. not rental or commercial etc)

Cheers!

There's no tax liability on any money you release from the remortgage. You could use the extra money for a variety of things such as home improvements, holidays, new car etc and it would all be fine.

If you INVEST the money then you will have to pay tax on any profits / income.

[Eric Mc]

bigunit00 said:

Eric Mc said:

If you have released equity and taken on a larger loan - what's the point?

To use the cash for something else?

The OP should explain what his intentions are.

Is "remortgaging" the same as "releasing equity" - or just using your home as collateral?

[iDrive]

Thanks for the replies!

My intention is to take some of the equity we have in our home and spend it on something superfluous and V8...

In effect, albeit in a round about way, I am looking to get a mortgage rate loan on a nice car - rates are lower now than when we took out the current mortgage and well below the rate we can afford (I do recall the high rates and the pain they brought).

I'd reasoned with myself that there was no CGT liability and could find nothing on the HMRC website that suggested there would be.

Thank you

[audidoody]

You're going to release money from your house on long term debt to buy a depreciating asset?

Mmm'... ok

[otolith]

So long as he overplays to clear the debt in a normal period of time, it's no different to a cheap personal loan. And no different to using savings to buy a car instead of using them to overpay the mortgage.

[98elise]

otolith said:

So long as he overplays to clear the debt in a normal period of time, it's no different to a cheap personal loan. And no different to using savings to buy a car instead of using them to overpay the mortgage.

Agreed

This is why my mortgage is an offset one. If I need to borrow I can do it at very low rates, then I can pay back in any timeframe I want (normally faster than a loan)

[iDrive]

audidoody said:

You're going to release money from your house on long term debt to buy a depreciating asset?

Mmm'... ok

I dont anticipate living very long, which means "I win"....

[LeoSayer]

audidoody said:

You're going to release money from your house on long term debt to buy a depreciating asset?

Mmm'... ok

I could sell my 993 and use the proceeds to pay off some mortgage....but the man maths says otherwise.

[TrickyDicky101]

iDrive said:

My intention is to take some of the equity we have in our home and spend it on something superfluous and V8...

Superfluous and V8 are two words that should never appear in the same sentence ;-)

[iantr]

iDrive said:

My intention is to take some of the equity we have in our home and spend it on something superfluous and V8...

At the risk of stating the obvious, "taking some of the equity" isn't achieved by borrowing against an asset. It's not a simple as "My house has increased in value by £100k, so I'll spend £50k on whatever...." You will be borrowing the money, and you will have to pay it back with interest. Other than the likely rate of interest and the consequences of falling behind on repayment, this is no different to buying the something superfluous with a credit card/bank loan/finance deal. This is why there is no tax liability on transactions such as the one you are contemplating; there is no gain/profit/income to be taxed...

[mikees]

Have a look at some of the current Aston Martin deals......... 22k dealer contribution and keep your mortgage :-)

[Simpo Two]

Borrow money to spend it on a depreciating asset that costs money to own? Only for the rich or foolish.

[otolith]

swerni said:

Unless you're mortgage free, this is in effect, exactly what everybody does, rich or poor

Don't be mean.

I mean, it's completely true, but it's not kind to point it out.

[iDrive]

iantr said:

At the risk of stating the obvious, "taking some of the equity" isn't achieved by borrowing against an asset. It's not a simple as "My house has increased in value by £100k, so I'll spend £50k on whatever...." You will be borrowing the money, and you will have to pay it back with interest. Other than the likely rate of interest and the consequences of falling behind on repayment, this is no different to buying the something superfluous with a credit card/bank loan/finance deal. This is why there is no tax liability on transactions such as the one you are contemplating; there is no gain/profit/income to be taxed...

Pretty much what my wife said

mikees said:

Have a look at some of the current Aston Martin deals......... 22k dealer contribution and keep your mortgage :-)

Pretty much what I heard when she said the above....