Reduce mortgage on rental property or own home?

niknokkinoonoo

Hi wonder if anyone can help please? We have two properties, one which is let out and has just converted to the bank's standard variable rate and are paying the interest only and a second property in which we live on a repayment mortgage - tracker until some time in May 09. I have approx. £10k in an ISA and think it might be a good idea to reduce one of my mortgages but not sure which, if any, or would it be wiser to leave the money where it is? Many thanks!

inca_2

Hiya, I can't advise you on which mortgage to overpay on but some things to consider would be, what interest rate are you paying on both of the mortgages? Are you in or close to negative equity on either of the properties? Are there any restrictions on what you can overpay on the tracker? Do you have other savings for emergencies other than your ISA? There will be other factors to consider but hopefully going through a few of these things may help you come to a decision.

RainMaker_2

Another major factor to consider is tax. You get tax relief on the interest paid on the rental property and no relief on the home mortgage. Look at the net cost of both mortgages.

silvercar

RainMaker wrote: »

Another major factor to consider is tax. You get tax relief on the interest paid on the rental property and no relief on the home mortgage. Look at the net cost of both mortgages.

Its not quite as simple as that. The interest paid on a mortgage would be an allowable expense, upto the value of the property when first let. There is no obligation to have all the loan secured on the let property.