Hi Mark,

Under the FCA Buy to Let is classified as a commercial loan and not fully regulated with regards to fact finding, suitability letters and whole of market searches or require qualified advice.

This is because it is deemed the borrower is more informed and does not require the same consumer protection. There are regulated BTLs but this is more niche where the original purchase of the loan was not for the intention of investment or was for close family members.

However all BTL loans for residential property (not holiday lets) fall under section 24 mortgage interest relief restrictions.

The distinction HMRC failed to point out to you is that if you purchase a commercial property (not residential) such as a shop or office with a pure commercial mortgage then this does not fall under section 24.

I hope that helps a little.

So it's the usual 'heads we win, tails you lose' scenario Mark

No it isn't, either by lenders or HMRC - a commercial mortgage is one you might use to buy a guest house and it is much more onerous in its lending criteria. You have to supply quarterly accounts, business plan etc.

One of mine is a shop with two flats above. Would HMRC class this as a commercial mortgage? I seem to recall the lender did.

Thanks for the replies so far

Puzzler - Its ironic that they wanted to introduce quarterly accounts for HMRC tax returns and also under PRA new regulations a 'portfolio landlord' can be asked to produce a business plan.

There is no legal definition of a commercial mortgage that I am aware of.

I am quite certain that HMRC would have been referring to mortgages secured against commercial property as opposed to residential property.

"A commercial mortgage is a mortgage loan secured by commercial property, such as an office building, shopping center, industrial warehouse, or apartment complex. The proceeds from a commercial mortgage are typically used to acquire, refinance, or redevelop commercial property." - for example, HSBC will not lend on residential property if you will have more than four mortgages unless it goes to a minimum loan of greater than £1.5 million for a development. Also a commercial mortgage will only be lent on a capital repayment basis. They also lend on e.g. guest houses, hotels and B&Bs as these are trading premises. Not a legal definition but the banks have pretty strict definitions.

Reply to the comment left by Puzzler at 05/01/2018 - 16:41
there are many lenders who do intrest only morgages for first 10 years , i have one on a shop and am doing another intrest only on another

With my 1/3 commercial, 2/3 residential (flats above a shop), on a capital repay mortgage, I wonder whether my accountant can apply the section 24 rule to only 2/3 of the interest payments?

Solution, raise or increase to the maximum a commercial loan on eligible but unencumbered property and pay of the S24 afflicted debt, simple debt replacement, just the same has you might with rate management.