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Confusing mortgage combo - not sure which route to go! help!
dt_matthews
Posts: 23 Forumite
:eek: Firstly, apologies if i fail to explain this very well, its a bit complex and i am a real layman at this stuff!
Scenario:
1. Just exchanged contracts on a flat, purchasing with my g/f.
2. It is being financed by re-mortgaging my current flat (current no mortgage on it).
3. She has a flat with some equity in but we are extending the borrowing on it as much as possible to finance new flat (i.e. drawing down equity).
4. Given the state of the market for selling we intend to rent out our respective flat's and live in our new 'joint' flat, using the rental income to assist with the mortgage repayments.
Now, the issue is this:
I dont know whether to get a repayment or interest only mortgage. I know if we go interest only its more tax efficient (offset rent against interest payments) than a repayment option but the difference between the two types is £400 and I just dont know what alternative investment 'vehicle' I would be able to use effectively? I was thinking one vehicle would be to over-pay her mortgage.
Apologies if this isnt very clear but I'm sure some bright spark can offer a nugget of wisdom but I have to make the decision TOMORROW and my mortgage 'advisor' isnt really living up to his title!!! :rolleyes:
TIA,
dan
Scenario:
1. Just exchanged contracts on a flat, purchasing with my g/f.
2. It is being financed by re-mortgaging my current flat (current no mortgage on it).
3. She has a flat with some equity in but we are extending the borrowing on it as much as possible to finance new flat (i.e. drawing down equity).
4. Given the state of the market for selling we intend to rent out our respective flat's and live in our new 'joint' flat, using the rental income to assist with the mortgage repayments.
Now, the issue is this:
I dont know whether to get a repayment or interest only mortgage. I know if we go interest only its more tax efficient (offset rent against interest payments) than a repayment option but the difference between the two types is £400 and I just dont know what alternative investment 'vehicle' I would be able to use effectively? I was thinking one vehicle would be to over-pay her mortgage.
Apologies if this isnt very clear but I'm sure some bright spark can offer a nugget of wisdom but I have to make the decision TOMORROW and my mortgage 'advisor' isnt really living up to his title!!! :rolleyes:
TIA,
dan
0
Comments
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aynone got any advice?? :-)0
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IO or repayment, the interest on the mortgage payments are an allowable expense against the rental income. You can claim the interest as an allowable expense upto the value of the properties when you first let them.
As for repayment vehicles, one option you would always have is to sell either or both the rental properties to repay the mortgages, so the repayment vehicle isn't as essential as it would be for someone buying one residential property with no other mortgage.
If you are worried about voids between tenants and have little savings I would be inclined to go interest only and boost your savings so you have money set aside to repay the mortgage when you want.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0
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