Landlord's quandry. Which mortgage should I reduce?

sue_marie

I have two houses, my family home and one that I rent out. A perk of my job is that the mortgage (£45k) on my own house tracks the bank base rate, so is really low at the moment. The mortgage on the rented house is £105k and is a 4% interest only fixed rate, which finishes in June 09. I get tax relief on that mortgage and pay tax on the other. I'll be made redundant in Spring (they call it early retirement) and want to sort my finances out as well as I can before that day comes. I can apparently keep my tracker mortgage and, if I want, can transfer some of my fixed rate mortgage over to the tracker. The question is: I'm currently getting tax relief on the fix rate's interest payments, which are £650 per month. Should I keep things as they are? Or move, say, £50k over to the tracker? It's at times like this when I wished I'd paid more attention to my maths teachers!

silvercar

Its the tax laws you need to keep in mind. You can claim the mortgage interest as an allowable expense wherever the mortgage is secured. So if you move the mortgage off the rented property you will still be able to claim the interest as an allowable expense.

No point keeping the interest rate high just to reduce your tax bill, as you'll still be paying more interest.