I'm making a real mess of my mortgages and need help please

Angelina-M

Hello everyone.

I hope its ok to post my financial situation here, i've got into a bit of a mess and need help to point me in the right direction so I can go on and sort myself out.

Basically I have four small BTL mortgages of between £13000 and £18000, these bring in a rent each of approx £68 per week. These were on a reduced rate that has now ran out so are at the Lenders standard variable rate.

I also have an offset mortgage of £125,000. (the first £60000 is on endownment)

Last year I bought a new property to rent out. This I purchased by using my £30000 savings and taking £100,000 from my offset pot. I rent this property out for £550 pcm.

So at this moment, I have no savings and my current account is £100,000 overdrawn and my mortgage amount owing is going up every month!

I dont know whether I would be better off selling at least one of my BTL houses (each worth about £60,000) to reduce my overdraft. Its just that the rental amount seems a very good return for the small mortgage. So maybe im better off getting a new BTL for the £130,000 and clearing my overdraft and paying myself my savings back to help the offset.

There has to be a better way than this but there seems so many routes I could take as all my mortgages etc are now on penalty free moves. I also have around £150,000 equity in my main house now so could even remortgage that?

Can anyone throw in any good pointers that i've overlooked as im probably not seeing the wood for the trees at the moment.

Thank you

silvercar

Forget your mortgage amounts for the moment. What are the yields on your BTL properties? (total annual rent divided by property value). If each one is not returning at least 5% then I would suggest you sell it. The equity you then release can be better used reducing that £100,000 overdrawn account.

Angelina-M

Hi there and thank you.

It seems I am getting between 6 and 6.5 yield on my properties. I did the calculations on what the houses are worth now, rather than how much I owe on them. If its on how much I owe, then the return is approx 25%.

The rental properties do seem a good return for little outlay. My problems started when I bought the final property for a lot more and put it on my current account instead of a BTL. This is what has made my offset start going up :-/

herbiesjp

Have you considered a flexible mortgage as opposed an offset deal - these rates are normally lower than offset rates.

What rate are you paying on your offset?

Angelina-M

Right, just been on to the Woolwich who tell me im paying interest at a rate of 5.25%

They have said I can increase my payments or remortgage to clear my overdraft. Looking at it that way, its still a better rate than getting a BTL on my other property and clearing the overdraft.

Angelina-M

I spent yesterday searching round to find information as to the best way forward for me and it seems that most people say that an offset mortgage is not worth it unless you have a good portion of savings. However my current account is linked to the offset so if I make more use of credit cards etc and pay out everything as late on in the month as possible, then I will have a good couple of thousand sat in my account for most of the month.

Am I on the right thought track here? I've looked at discount rates and whilst I can save a few thousand over the first years, I stand to save around £14000 in interest by using a current account connected to an offset wisely.

Thanks guys

herbiesjp

It really does depend on what rates you are comparing i.e. what discounted rate versus which offset rate.

I say this as there are other better rates than the 5.25% offset rate you are currently paying with Woolwich

Angelina-M

Thank you, it does seem that the interest rate bit is the main factor that makes offset not so desirable to most.

Looking at the figures, even though a cut rate mortgage offers me a better rate than offset, once I factor in the money sat in my current account every month, this soon balances out any money saved with the cut rate deal.

However, as you mention, the 5.25% offset with the woolwich isnt very good. I think im going to continue on the offset path and maybe look at selling one or two of the rental properties. I know they only have tiny mortgages on them and its a good return, but the house prices have gone up a lot and taking my money out now (approx 40k each) seems sensible.

Money eh :-)