repayment or interest only

Poppy_Kennedy

Hey every one,

just wanted a bit of advice as what to do with the extra money i am getting now that my rented flat is on Nationwide BMR rate of 2.5%.

The house i live in currently is worth around £345,000 and have a mortgage of £260,000.

We are on part repayment / part interest only on a 5 year fixed of 5.4%.

The flat i rent out is interest only.

I make money from rental income an after tax man and ground rent i get approx £300 per month.

At the moment i am saving this but wondering whether i should put that money to my current mortgage

Or have the flat on repayment.

bearing in mind the 18% Capital Gains on the flat when i come to sell is it better to have less money in it or more??

or whall i put £300 in to an ISA?

i have no clue and woudl appreciate some advice from people who knwo their stuff when it comes to finance to point me in the right direction - obviously who knows how long this rate will last.

Thanks alot

Thrugelmir

By reducing your BTL mortgage you will reduce the amount of interest you are able to offset against the rental income.

Therefore it would be advisable to use the additional income to reduce the capital balance on your main residence currently.

On what basis is your mortgage with the Nationwide for the flat? Is it consent to let?

getmore4less

CGT is independant of the size of the mortgage


Unless you can get a better rate for the money overpay you own mortgage(check for penalties)

Don't forget you need contingency for voids and expenses on the BTL.

VIGILANT22

[QUOTE=Poppy Kennedy
.

bearing in mind the 18% Capital Gains on the flat when i come to sell is it better to have less money in it or more?? [/QUOTE]

Yr mortgage does not affect CGT...

The tax applies on the gain, not on the amount you sell it for. For example, if you bought if for 200k and sold for 300k, you have made a gain of 100k.....subtract costs.... as well as any losses made on the disposal of any other assets in that year...... you may also subtract the annual exempt amount, currently 10k for every individual.

Poppy_Kennedy

thanks for your replies

Its consent to let mortgage - i only lived in it for a year..

sorry yes i know the mortgage doesn't have anything to do with CGT just the gain but if i was to pay off say £5000 of my mortgage would that not be £5000 that would be added to my gain or do they take off what you have paid towards the mortgage??

so i bought the property with a £102,000 mortgage its worth £140,000 on average.

38,000 gain.

if i repayed say £5000 over time and then had mortgage of 97 years then my gain would be 43,000 therefore paying more CGT no?

thanks alot for your advice

VIGILANT22

No.... yr mortgage has nothing to do with CGT...The G in CGT is the clue = GAIN....Between the purchase price and selling price....you sell for the value of the property not the mortgage you have....I did explain above ie buy for 200k sell for 300k etc....

dimbo61

You wont pay any CGT if you sell within 3 years of first renting it out !
How long have Nationwide given you consent to let for ?
You should build up a good emergency fund of upto £16K and then overpay your main mortgage

Poppy_Kennedy

thanks alot

Nationwide didnt give me a deadline actually - they just agreed and that was that.

is there usuall a deadline then?

thanks again!

VIGILANT22

Poppy_Kennedy wrote: »

is there usuall a deadline then?
QUOTE]

Nationwide normally allow 3 yrs

Poppy_Kennedy

thanks Vigiliant - its been over 3 years and they are giving me options to fix for 5 years so obviously i have no deadline