Mortgage/savings, not sure what the best move is- opinions please

Gillybean

Hi I'm new here,

OK, here's our situation. Our current home has a mortgage of around 134k, with around 7 months till we can shop around for a better deal. We also have a house that we rent out, with a 74k mortgage on. Again I think we're tied in till next Feb.

Husband is self employed, I'm a stay at home mum. At the moment we can (just!) afford to pay the mortgages on both properties and so we save the rental income (£440 per month). Currently in terms of joint savings we've got around 10k. I've got around 7k in personal savings and some shares.

So my idea is this. Now we've got some money behind us for 'What if hubby can't work for 6mths' eventualities, should we:
a) Think about looking for mortgages where we can overpay and plough the rental income into clearing them quicker (Which one? Split it over both?)
b) Keep saving the cash for future property purchase. We'd like to move to a bigger house in the next few years and hopefully buy another rental.
c) Neither of the above, whatever ideas you guys may have!

Looking forward to your wisdom,

Gillybean

MarkyMarkD

There's no point borrowing on the mortgage, and saving the income, unless you get more interest on the savings (after tax) than you are paying on the mortgage, which is unlikely.

I would suggest that you get a mortgage which you can overpay for your own property, and plough the rental income into that. Leave the £74k outstanding on the rental property to maximise tax relief on the interest and don't worry about getting that onto a flexible product.

If you want to buy another property in future, you will have the extra equity in your own property to facilitate that.