Pay off Mortgage or Buy to Let Property? Or a bit of both?

Damo77

Hey guys, hope you are all well.

I have £125,000 left on the mortgage of my house which is worth around £300,000 (I share with Missus & 2 young Children). We have just come into some money, £120,000 to be precise and I have been getting mixed advise as to what best to do with it. I also have around £15,000 in a savings account.

We are currently getting a great interest rate on our mortgage, just 0.25 above BoE base rate.

I am torn between what I see as my best options.

1) Pay off whats left on the mortgage.

2) Use money to buy a second property to rent out to try earn some money and hopefully as a bonus the property I buy will increase in value in time.

3) Pay off some of the mortgage but save enough for a deposit on a buy to let property which I can earn enough rent to pay for itself and I gain the benefits of any possible future property price increases.

What do you guys think? Any advise would be greatly appreciated.

Thanks

Jonbvn

IMHO, it would be a poor MSE decision to pay-off such a low interest rate mortgage.

Why are you so set on BTL? Too many eggs in one basket etc, poor yield ATM.

Have you considered other investments? Have you filled up your & OH's ISA's? Next April the ISA limit increases substantially.

Overall, I would say go an see an IFA and get some proper advice.

dimbo61

First of all put the money when you get it into the best savings account EGG or ING and fill a cash ISA for yourself and the OH £3600X 2 .
Then consider your options!
with a bit of luck the savings will more than offset the mortgage interest even after tax!
Put another £5100 X 2 in april or even consider a stocks & shares ISA £10200
each.
Being mortgage free means you OH does not have to work if she does not want too and you can enjoy life without the worry of a mortgage
GOOD LUCK

weezl74

Hi there,

Congrats on your windfall. Are you in your forever house?

If there's any chance you want to upgrade and have more space for your family, then I'd use the windfall as a way of getting that now while the market is low. I would do this especially if your current mortgage is portable. If so, then I'd move and then do what Dimbo says

stevwarn

I need some advice. I also stand to inherit enough money to pay off my mortgage (appox £80k). However, it is currently fixed at 3.99% for 5 years. The redemption penalty is 5% yr1, 4% yr2 etc until 1% in the final year. My wife does not work and therefore can claim back the tax. I would like to pay the mortgage off just to ‘get rid’ but I am aware this is not financially prudent.

Is there a calculator that will help me work out when/if it is worth paying off the mortgage vs saving? My other question is it worth fixing for the five years to get a reasonable amount of interest e.g. 4.7% (to cover the fixed rate period) or go for a lower but more flexible rate?

weezl74

stevwarn wrote: »

I need some advice. I also stand to inherit enough money to pay off my mortgage (appox £80k). However, it is currently fixed at 3.99% for 5 years. The redemption penalty is 5% yr1, 4% yr2 etc until 1% in the final year. My wife does not work and therefore can claim back the tax. I would like to pay the mortgage off just to ‘get rid’ but I am aware this is not financially prudent.

Is there a calculator that will help me work out when/if it is worth paying off the mortgage vs saving? My other question is it worth fixing for the five years to get a reasonable amount of interest e.g. 4.7% (to cover the fixed rate period) or go for a lower but more flexible rate?

Are you in year 1 of the 5 year fix stevwarn?

dimbo61

Hi stevwarn,
I hate paying ERC and you should if you shop round be able to invest in fixed rate bonds such as YBS are offering 4.65% over 3 years and ISA,s ( tax free) to at least equal your current 3.99% mortgage.
Contact your lender and ask to reduce the term to 5 years and use the money in savings to pay the extra each month GOOD LUCK

Damo77

Thanks for the advise guys.

Paying off the mortgage if that was what I decided was never gonna happen until interest rates went up anyway.

Thanks and anybody else please feel free to offer advise as well.

I'm surprised nobody thought the BTL property was worth considering? Especially if property prices eventually get back near to where they were before the fall. Could make

Cheers.

dimbo61

I have family and friends with BTL student properties in a big city up north.
Its a lot of hard work and now government pays rent direct to tenants and not to landlord arrers are mounting up. ( what a mess )
So many safety rules and costs.
You really need to know what you are doing
Just look at all the let signs in your area!

RosieTiger

Not quite sure thats a relevant question on this board