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    • californiagirl
    • By californiagirl 17th Mar 17, 8:30 AM
    • 35Posts
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    californiagirl
    Pay off mortgage earlier or save? Development/BTL mortgage vs Residential?
    • #1
    • 17th Mar 17, 8:30 AM
    Pay off mortgage earlier or save? Development/BTL mortgage vs Residential? 17th Mar 17 at 8:30 AM
    Husband and I are about to pay off our mortgage, but rather than bask in this newfound freedom, we may be about to purchase some land from a friend with planning permission for a 3 bed house. The plan is to buy the land and do nothing for a couple of years (we have just finished extensive renovations & have young kids), then begin building just before permission runs out.

    Some context: We are about to own our 3 bed house outright (currently work 310k). The land will cost 125k, and we envisage the build costs being 200k (husband is a builder). We plan to sell our home once we've started foundations, and the equity will then pay for the build.

    I have a few questions with regards the best way of managing the process:

    1. Are we able to take out a new mortgage of £125k on our current house that we own outright to buy the land? I'm assuming this will be much cheaper than getting a "developer's mortgage" on the land?

    2. We would be able to save £1000-1500 in addition to our normal savings. Should we use this to pay off the mortgage quicker, or put into savings to go towards the eventual build?

    3. Once the house is built, we anticipate that we will not have a mortgage (and do not plan to move again). However, we are in our early 30s and are unsure as to whether it is the best time to 'get off the wheel' so to speak. Peace of mind from being mortgage-free is very appealing, but we don't currently have a pension etc as we are self-employed and have so far put our money into property (we bought our first run-down home at 21). Should we consider selling our current house whilst we start the build, then buy a smaller property to live in during the works and rent out in future? I'm assuming we could eventually have the mortgage (estimated 175k) either on our newly-built home as a residential mortgage, or as a buy-to-let on the second property?

    There are so many possibilities that we are finding it hard to see the wood for the trees (excuse the cliche). We would appreciate any constructive feedback on 1, 2, or 3 (or all of the above). Thanks so much.
    Last edited by californiagirl; 17-03-2017 at 9:42 AM.
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