Pay off BTL mortgages with my home mortgage with lower rate?

lavenderlady

Hi all

Please can someone advise me on whether my thinking on paying off BTL's is right and is actually a good idea!

I have four BTL's that have just five more years to run and have a combined total of £30000. They are on a SVR of 4.99 at the moment and I pay £550 in total for the four every month.

My home mortgage is an offset mortgage that runs at .75% above Barclays base rate, currently at .5% making my monthly payment 1.25% right now.

I am thinking about paying off the BTL's with £30000 from my reserve account. I believe that the new monthly payment for this pot would be approx £200 but I want to carry on paying the £550 each month to chip away at the figure.

This seems like a really good idea so I'm assuming there's something I havent taken into account.

Can someone please tell me if its a good plan please?

Many thanks for any advice.

silvercar

What is the tax situation?

(as you probably know) you can claim the mortgage interest as an allowable expense against the rental income upto the value of the properties when first let. There is no obligation to secure (all) the mortgage on the let properties.

Depending on when you started letting,

Currently you would be counting the mortgage interest on the let properties as an expense (all of it?) and possibly also the interest on your home mortgage, if that funded the deposits. Paying one set of mortgages off may reduce your allowable expense.

lavenderlady

Thank you silvercar.

Ok I have thought about the tax situation but the figures are so low. I purchased the properties ten years ago for between £14000 and £18000 so my tax figures are very small!

The properties are repayments so the actual interest isn't much each month and of course even if I leave things as they are then they will be paid off in full in five years anyway.

My thinking is that as I'm going to continue paying the full amount I pay now (£550) then I will knock a good amount off the actual capital and then when that £30000 is paid off I can continue paying the £550 off my own mortgage.

dimbo61

I would use the £30,000 from the offset pot to clear the 4 mortgages IF you have no ERC charges to pay as you will then own all 4 BTL properties with no mortgage.
Then save as much money in the offset pot as you can afford over the next 1/2 years and see how the market goes.
Having a large offset pot means you could buy with cash another BTL property if one comes on the market you like !!! or keep overpaying your
home mortgage to become mortgage free !! GOOD LUCK

lavenderlady

Thank you very much dimbo61.

It looked to be straight forward but I wanted to check I hadn't overlooked something obvious!

I shall go ahead tomorrow and get the ball rolling by getting settlement figures. There are no penalties to be paid.

My finances are in a mess at the moment so this is the start to pulling them back around.

Thank you