Save for another or Pay off Existing??

Progress

Hi Folks,

In a quandry at the moment and just after some friendly opinions. Will try to keep it brief.

25 years old,
Live at home (moving out in next 12/14 months, possibly with Mrs)
1 invesment property with tenants in and paying (Bought cheap as repo, £43k less than last sold, Currently £20k less than the nearest cheapest similar property)

I'm considering:

A) Saving up for another investment property before moving in with Mrs

Overpaying on current investment property (By 142%) while I can, then reducing that down to 60% when i move out. Effectively halving the mortgage term, leaving me Mortgage free at 38 on that property

C) Continue to have tenants pay the mortgage for 25 years per say

Outcomes:

A) By saving up for another property i'd have another 25 year debt to clear, but would give me more options at 50 and be able to put towards pension/early retirement.

By overpaying 60% i'd save £32k in interest, cut the mortgage down to 13 years and pay only £23k interest, leaving me mortgage free with the option to keep/sell, remortgage for more properties, put towards early retirement at the age of 38.

C) By leaving the tenants to pay the rent/mortgage i'd incurr £55k interest over 25 years, still leaving me with options to put towards retirement.

When i mention 'saving', the cost of interest would be taken up by tenants rent throughout the duration (I'd obviously cover void periods)

Thanks in advance

lozzam

I'm not an expert, but one thing to consider on your investment property is tax implications. Imagine you have paid off the mortgage, then (almost) the entire rental income is taxable (20% 40% ?) If you keep the mortgage then the interest can be deducted from the income, so you pay, say, 6% on the income instead.

A lot of people find this counter-intuitive, but the investment is based in the increase in value of the property. Hence you would be better off not doing option B.

NB You are usual advised to take proper financial advice if you are doing buy-to-let - I am in no way a financial advisor!