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    • Threeunderthree
    • By Threeunderthree 29th Nov 17, 5:12 PM
    • 8Posts
    • 4Thanks
    Threeunderthree
    which mortgage to pay off first?
    • #1
    • 29th Nov 17, 5:12 PM
    which mortgage to pay off first? 29th Nov 17 at 5:12 PM
    Hi, we have a larger mortgage (120k) on our main home and a smaller one on a rental property (80k) which used to be our main home. I have recently come into an inheritance (40k) and wonder is it better to put towards our main home or rental home?

    thanks for any advice
Page 1
    • dimbo61
    • By dimbo61 29th Nov 17, 5:46 PM
    • 9,585 Posts
    • 5,181 Thanks
    dimbo61
    • #2
    • 29th Nov 17, 5:46 PM
    • #2
    • 29th Nov 17, 5:46 PM
    Check out the ERC,s if any on both mortgages ?
    Your Interest only mortgage payment on the rental is Tax deductable !
    How much is the Interest rate on both mortgages ?
    • Threeunderthree
    • By Threeunderthree 29th Nov 17, 10:04 PM
    • 8 Posts
    • 4 Thanks
    Threeunderthree
    • #3
    • 29th Nov 17, 10:04 PM
    • #3
    • 29th Nov 17, 10:04 PM
    thanks, but the mortgage payment isn't tax deductible soon is it?
    main home interest rate 1.95
    rental interest rate 2.75

    thanks for any advice
    • getmore4less
    • By getmore4less 30th Nov 17, 4:41 AM
    • 30,749 Posts
    • 18,376 Thanks
    getmore4less
    • #4
    • 30th Nov 17, 4:41 AM
    • #4
    • 30th Nov 17, 4:41 AM
    I don't think you understand letting tax and how it is changing.
    are you high rate tax?

    what is the gross yield on the rental.

    You also need to look at LTV and what rates you could get with smaller mortgages.

    is the let on interest only or repayment what are the full terms

    either fixed or variable either a tracker.

    also not answered the ERC question and if there is ERC what is it and how long to run.

    Any plans to move.

    You also have to look at if there are better places to invest, maybe pension,ISA

    There are accounts paying over 3% so some/all could be distributed to them.
    • Threeunderthree
    • By Threeunderthree 30th Nov 17, 7:18 AM
    • 8 Posts
    • 4 Thanks
    Threeunderthree
    • #5
    • 30th Nov 17, 7:18 AM
    • #5
    • 30th Nov 17, 7:18 AM
    no, i dont think i do understand it!
    Not high rate tax but my husband is close and in both names.
    Let on interest only mortgage
    fixed until august 2018
    ERC (not sure how much) but intend to remortgage both for better deals if possible in august
    no plans to move
    I'm keen to pay off the main home mortgage asap but may be more sensible to pay into rental so money is available (by selling property) if necessary.

    many thanks
    • getmore4less
    • By getmore4less 30th Nov 17, 7:26 AM
    • 30,749 Posts
    • 18,376 Thanks
    getmore4less
    • #6
    • 30th Nov 17, 7:26 AM
    • #6
    • 30th Nov 17, 7:26 AM
    you won't know wich is best till you have all the information and crunch the numbers.
    • Adrian Dorr
    • By Adrian Dorr 30th Nov 17, 7:57 AM
    • 13 Posts
    • 8 Thanks
    Adrian Dorr
    • #7
    • 30th Nov 17, 7:57 AM
    • #7
    • 30th Nov 17, 7:57 AM
    In all likelihood paying off the mortgage with the higher interest rate would be best, unless they both have a high LTV, in which case paying of some might get you a cheaper mortgage.
    I don’t think the changes will make much of a difference, as a basic rate tax payer you’ll continue to get 20% tax relieve on the interest, which means the interest on the BTL is still 80% of 2.75% which is 2.2%.
    Of course only actually pay it off when the fixed permit is finished and you don’t have to pay a penalty, but do what overpayment you are allowed to do now.
    • silvercar
    • By silvercar 30th Nov 17, 8:33 AM
    • 36,185 Posts
    • 152,919 Thanks
    silvercar
    • #8
    • 30th Nov 17, 8:33 AM
    • #8
    • 30th Nov 17, 8:33 AM
    It is the purpose of the loan that counts (as an expense of the rental business) rather than where it was secured.

    So presumably, you claim the interest on loans upto the value of the property when first let, even if some of that loan is secured on your now residential property, given that the purpose of the loan (or part of it) was to retain the previous property for the purpose of letting it. Rather than selling it to reduce the mortgage size required for your main home.

    That being the case, for expense on the rental purposes, it shouldn't matter which loan is reduced.
    • Threeunderthree
    • By Threeunderthree 1st Dec 17, 7:17 AM
    • 8 Posts
    • 4 Thanks
    Threeunderthree
    • #9
    • 1st Dec 17, 7:17 AM
    • #9
    • 1st Dec 17, 7:17 AM
    thanks for all advice, not a simple decision after all, I will probably seek some professional help. many thanks everyone.
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