Worth Re-mortgaging or not.

Engeroosi

I currently have a mortgage on a flat I rent out, there is an early repayment fee of £1500 and there is 3 years left on the fix rate of 5.63% When I took this mortgage I was living in the flat, now I rent it out I would need a buy-to-let mortgage I believe. The mortgage provider knows I let it out.

Outstanding balance is £44300(Been over paying)
Property valuation now £90000
Monthly paymnent £360

Is it worth me looking to try and re-mortgage for a better interest rate? I would like an offset mortgage too so I could use savings etc to bring down the balance and therefore the subsequent interest.

Wh05apk

In a word no!

Your penalty is approximately 3.5% + about another £1000 app fee, that makes fees/costs nearly 6% of your current mortgage, you will not save 2% a year on another deal.

If you are renting the property out, you will be offsetting mortgage interest against tax (assuming you are declaring it?) using your savings to pay down the mortgage will increase the profit, hence you will pay more tax, so you really need to think this through and look at the figures closely before paying back.

dimbo61

You also need to consider Capital gains tax if you rent out the place for more than 3 years.
Dont overpay the mortgage but build up your savings instead and have savings for void periods, repairs, Tax payments ETC.
The 3 year deal you have is better than many of the BTL mortgages currently available and thats before the 2.5% fee

Engeroosi

So basically I should be looking to have as big a mortgage possible on that property and be looking to clear my home mortgage off? I haven't been filling out any tax forms, what forms should I fill out and where will I find them as I don't want to be hit by a big bill when the taxman finds me!!

Any assistance please. I'm not clued up on this tax at all, I fell into being a landlord, not by choice.

jockosjungle

You need to fill out an SA return with the property income pages at the very least, not sure what other income you may have

Engeroosi

Ok, not posted on this thread for a while.

I have recently been informed by my mortgage provider that the interest rate will be increasing by 1.5% next August as I have been letting the property on a residential mortgage for 3 years. This was an enforced decision due to work commitments. Does anyone know if I have any option to pull out of the mortgage and re-mortgage elsewhere without incurring the ERC? I would be able to find a cheaper BTL mortgage elsewhere than paying the increased 1.5% ontop of my 5.63% I currently pay. The details of the mortgage are detailed in the initial post.

Thrugelmir

Engeroosi wrote: »

Ok, not posted on this thread for a while.

I have recently been informed by my mortgage provider that the interest rate will be increasing by 1.5% next August as I have been letting the property on a residential mortgage for 3 years. This was an enforced decision due to work commitments. Does anyone know if I have any option to pull out of the mortgage and re-mortgage elsewhere without incurring the ERC? I would be able to find a cheaper BTL mortgage elsewhere than paying the increased 1.5% ontop of my 5.63% I currently pay. The details of the mortgage are detailed in the initial post.

I assume you are referring to the decision by the Nationwide. Currently you have no options other than to pay the charges they demand.

Have you resolved the matter with the HMRC yet ?

Engeroosi

Yeah the decision by Nationwide. So no opportunity to remortgage elsewhere to save money? The rate of interest is ridiculously high in my opinion considering the bank of england rate.

I am currently sorting it out through an accountant. Unfortunatley it appears I will have a fine to pay but should manage to offset costs against taxes so will not be too much expenditure. Fingers crossed.