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So my first one I bought at 44K
Over the years I bled it dry 3 times to remortgage and buy more
And got up to a 111K mortgage on it as it increased in value to 130K . So 85% LTV
If I sold / had to sell at that point I would have had 19K equity but CGT on 86K
Lets say I sold another that year so no 20K or so joint relief
I then pay 28% on 86K = 24K
So I`m 5K in the red ( before fees)
If that 130K went down to 115K in a dip ( approx 12% ) I`m 20K in the red
And that`s a relatively gentle example as I`m in the SE and prices are historically strong
Jonathan Clarke. http://www.buytoletmk.com
That seems a very extreme example JC.
You would have to have an appreciating property to be able to remortgage. It would then have to stop appreciating at the point you took out an 85% LTV mortgage (are these still available?). You would have to be a HRT who has already sold another property in that tax year and used all the allowances.
In your example would there still be an overall loss if you combined the sales of both properties, would the first sale produce enough profit to cover the losses of the second?
Yes I agree a lot of things have to come together to be in the red
I dont think 85% LTV are still available no - so it makes it harder to get into a CGT hole
But the reason I say gentle is perhaps because as DL alluded to - a bad crash as in the NE where they dropped around 40% and still havent recovered since 2007 then you could get really stuck in no mans land . If that was mine it may have been knocked back to 78K value with a 111K mortgage - Ouch
And then sec 24 additionally may tighten the noose on your cash flow which you may have been planing to use to tread water until values recover
If I had sold my comfort was the others i had bought with it would have in effect covered the losses
I always saw the first 5 or so as loss leaders in effect .
They were the workhorses which provided the deposits for the pyramid growth
As it happened that one recovered to about the 160K level it is today so if sold I would be in the black
So I tend to agree you may have to go some yes to still be in the red after the CGT is paid
ah right, that clears things up a lot more. So it was basically a combination of big increases in properties, causing increased profit margin on the sale. With acute lending rates. I see why and how that could happen now. I think it is in most peoples best interest now to try and pay down capital on at least some of their portfolios if not all at some point during the ownership.
My plan is to purchase on interest only for the 1st fixed term then move onto repayments, thus hopefully at one point having a few on each.
Thanks for clearing that up for me.
S24 was always on the cards as how can you do away with interest relief for owners on their main residence and not others who buy houses to rent or otherwise. They have addressed the inequitable position that had gone on for years. As i have said before they will introduce rent controls next- in Labour's election manifesto. Many said it would never happen, well take your head out of the sand , it will happen if they get in.
Why not the same treatment for capital gains tax then? Why don't home owners pay that? Only on IHT anyway ...
"Change is a prerequisite to longterm survival".
The establishment is rigged so that the rich stay very rich, and the poor get poorer.
CGT on PPR home sales would kill house price growth and the sales market off virtually overnight! Imagine a whacking great CGT bill each time you moved and then IHT on your last home? Never say never these days, anything is possible for UK Govts.
The point I was making was re S24 and Osborne using "levelling the playing field" excuse regarding OOs and LLs. He said OOs don't get tax relief on their mortgage interest so why do we (LLs)? I said well they don't pay tax on capital gains.
I don't think many people predicted S24, nor stagnant property prices in the North, nor the credit crunch for that matter.
Maybe if there was a return of MIRAS then S24 could also be overturned and we would all be happy!!
I don't fear rent controls really as I consider my rents to be already fair and if CPI/RPI were added I might even be better off!
The removal of mortgage interest relief for landlords to match what had been done for owner occupiers had been called for for a long time. The only thing unforeseen about S24 was that it didn't go all the way.