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  • FIRST POST
    • berbatov10
    • By berbatov10 18th Mar 17, 5:02 PM
    • 310Posts
    • 19Thanks
    berbatov10
    Pay off a Buy to Let
    • #1
    • 18th Mar 17, 5:02 PM
    Pay off a Buy to Let 18th Mar 17 at 5:02 PM
    I have 2 BTL properties. I have inherited some money which would allow me to pay one off. The current mortgage is just coming to an end on this property.


    I earn around £46000/year and another £15000 (before tax) from my BTL's. I have no mortgage on my own home. I intend to work for another 2 years after which I will no longer be a high rate tax payer as I wont earn enough.


    Should I take out a further BTL mortgage for 2 years covering until I will drop to being a lower rate tax payer.


    Thanks in advance
Page 1
    • ACG
    • By ACG 18th Mar 17, 5:08 PM
    • 15,077 Posts
    • 7,621 Thanks
    ACG
    • #2
    • 18th Mar 17, 5:08 PM
    • #2
    • 18th Mar 17, 5:08 PM
    At the minute you can still declare the bulk of the interest as an expense - in turn reducing your tax bill. Especially as a higher rate tax payer, I suspect you would be better keeping the mortgages. It might be worth speaking to an accountant/tax advisor before making any decisions.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Nearlyold
    • By Nearlyold 18th Mar 17, 5:47 PM
    • 891 Posts
    • 722 Thanks
    Nearlyold
    • #3
    • 18th Mar 17, 5:47 PM
    • #3
    • 18th Mar 17, 5:47 PM
    You need to compare the difference between

    The net cost of the interest paid on the mortgage after any "tax relief" is taken into account.
    &
    The net interest you would receive after tax on the money if you don't redeem the mortgage.
    • dimbo61
    • By dimbo61 18th Mar 17, 5:59 PM
    • 9,396 Posts
    • 5,094 Thanks
    dimbo61
    • #4
    • 18th Mar 17, 5:59 PM
    • #4
    • 18th Mar 17, 5:59 PM
    You are already a higher rate tax payer so any money you pay into your pension will attract 40 percent tax relief which you can take in two years ?
    25 percent as a tax free lump sum !
    You could then use some of that lump sum to clear the mortgage or both mortgages.
    Really you need to speak to your accountant to find out the best way to maximise the money you now have
    • berbatov10
    • By berbatov10 18th Mar 17, 5:59 PM
    • 310 Posts
    • 19 Thanks
    berbatov10
    • #5
    • 18th Mar 17, 5:59 PM
    • #5
    • 18th Mar 17, 5:59 PM
    The sum involved is £73000. I can get maybe 1% interest on the money if I don't pay the mortgage off but on an interest only mortgage I can claim it all as tax deductible
    • dimbo61
    • By dimbo61 18th Mar 17, 6:00 PM
    • 9,396 Posts
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    dimbo61
    • #6
    • 18th Mar 17, 6:00 PM
    • #6
    • 18th Mar 17, 6:00 PM
    Do you have a wife/ partner ? Do they have a pension or pay tax ?
    • berbatov10
    • By berbatov10 18th Mar 17, 7:41 PM
    • 310 Posts
    • 19 Thanks
    berbatov10
    • #7
    • 18th Mar 17, 7:41 PM
    • #7
    • 18th Mar 17, 7:41 PM
    I have a partner who has no pension but pays tax
    • AnotherJoe
    • By AnotherJoe 18th Mar 17, 9:13 PM
    • 6,910 Posts
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    AnotherJoe
    • #8
    • 18th Mar 17, 9:13 PM
    • #8
    • 18th Mar 17, 9:13 PM
    Are you 55 or approaching it ?
    • berbatov10
    • By berbatov10 18th Mar 17, 9:39 PM
    • 310 Posts
    • 19 Thanks
    berbatov10
    • #9
    • 18th Mar 17, 9:39 PM
    • #9
    • 18th Mar 17, 9:39 PM
    I am 55 heading towards 56.
    • AnotherJoe
    • By AnotherJoe 19th Mar 17, 6:27 AM
    • 6,910 Posts
    • 7,355 Thanks
    AnotherJoe
    I am 55 heading towards 56.
    Originally posted by berbatov10
    OK so that puts you in a great position. You said "I can get maybe 1% interest on the money if I don't pay the mortgage off but on an interest only mortgage I can claim it all as tax deductible"

    So, if you pay the money under discussion into your pension, you get 40% on it (since you pay HRT) and pay (effectively) 15% on it when you withdraw it. So, an almost immediate 25% boost since your pension is accessible to you and you'll be withdrawing from it soon.

    Where else would you get that? And this is your final chance , whilst you are still a high tax rate payer.
    • getmore4less
    • By getmore4less 19th Mar 17, 7:03 AM
    • 29,171 Posts
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    getmore4less
    The will only be around £15k probably less to pension each year for 40%.
    • AnotherJoe
    • By AnotherJoe 19th Mar 17, 8:55 AM
    • 6,910 Posts
    • 7,355 Thanks
    AnotherJoe
    The will only be around £15k probably less to pension each year for 40%.
    Originally posted by getmore4less
    I think the OP is retiring this year so that's a one off chance to get about £4K for free.
    • berbatov10
    • By berbatov10 19th Mar 17, 10:20 PM
    • 310 Posts
    • 19 Thanks
    berbatov10
    Sorry for the delay. I retire October 2019. So I think the strong suggestion is put the money into extra pension and keep going with the BTL mortgage
    • dimbo61
    • By dimbo61 20th Mar 17, 7:46 PM
    • 9,396 Posts
    • 5,094 Thanks
    dimbo61
    Like I said speak to your accountant and check if there are limits to what you can pay into your pension ( do this very soon before 5 April )
    If you cannot earn much in interest then overpay the mortgages
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