should i change my mortgage to interest only?

chiefmissile

Hi,
Own my property with a £90,000 12 year mortgage, currently rent the house out for £840 pm (in the forces so do not need to change this to a residential mortgage. Mortgage costs £940pm (£500 capital £440 interest woolwich tracker .37% above the base rate lifetime deal)

I am going to Oman for 3 years in Dec and will have £2000 pm to save, should i change the mortgage to an interest only product and bank the £500 capital at 6.5% tax free + my 2000 or overpay the mortgage by 2500pm?

Any help would be much appreciated

dimbo61

read your post and a little confused
Own your property but you have a £90k mortgage so the bank owns a large part as well !
If you have a BTL mortgage then you can rent out the property unless you have got permission off your lender to rent out your home.
You will have to pay the nice tax man on the profit you are making from renting out the property.
Good luck in oman and if you could pay £2500 per month off your mortgage
then you would be mortgage free in 3 years !
The deal you have is very good so try and keep it.
Do you need £2500 per month in oman
Save into ISA,s as paying a better rate 6.5% than your mortgage.

chiefmissile

dimbo61 wrote: »

read your post and a little confused
Own your property but you have a £90k mortgage so the bank owns a large part as well !
If you have a BTL mortgage then you can rent out the property unless you have got permission off your lender to rent out your home.
You will have to pay the nice tax man on the profit you are making from renting out the property.
Good luck in oman and if you could pay £2500 per month off your mortgage
then you would be mortgage free in 3 years !
The deal you have is very good so try and keep it.
Do you need £2500 per month in oman
Save into ISA,s as paying a better rate 6.5% than your mortgage.

Thanks for your reply, have a large amount of equity in the property, the property is in my name only, but the rental income is paid directly from the lodger to my wife's own account, she does not work and as i understand i can move assets to her without being taxed as long as she does not go over her tax free limit. If you are in the armed forces most mortgage companies will allowed to rent your house (If posted out of area) out without having to change to a "Buy to let" product.

The £2500 is basically half my net salary, all my housing/utilities/school fees etc in Oman are paid for so want the most cost effective solution. But should i change the mortgage to interest only (Cost £50) and bank the £575 capital in a higher rate account? After the base rate change my mortgage will reduce to 4.87% meaning £365 pm interest and £575 capital

dimbo61

In that case I would fill a cash ISA,s each so £7200 each year and then overpay the mortgage if allowed and with luck in 3 years after your posting you will have the money plus overpayments to clear your mortgage.
Mortgage free before you leave the forces
Just be aware of the tax due on the rental income and changing to interest only for £50 would be a good idea.
Go and see an accountant its not that expensive and may put your mind at rest. GOOD LUCK