First post! Pay off residential mortgage vs BTL?

mfmaybe

Hi everyone :hello:,

I have been lurking on these boards for a while and decided to join! I am so inspired by what you have all been doing :cool:

So as I start to ponder the best way forward, I have a question. At the moment I have a BTL mortgage on my first home (a flat, now rented out); a joint (massive!) mortgage on our current home; and a car loan.

The flat and car are both mine personally, so paying them is my own responsibility. The house is a joint home with my OH, as is the mortgage. We both earn quite a bit (which is just as well, given the size of the mortgage). I have worked out that, with the amount I could overpay, it isn't worth paying off the loan (it's not flexible, so I'd have to save up at very low interest rates, at which point I'd only save about £300 interest on the loan).

My question therefore is whether to focus on the flat BTL or the personal mortgage. The flat mortgage is only c£40k, costs me £204 a month and the payment is tax deductible at 40% (obviously the interest only). The flat has never been empty in 9 years of renting it, is worth quite a bit more than I paid for it 11 years ago, and is my "nest egg". It has about 13 years to run I think. Rental income covers everything it costs me, plus a bit more besides. It's also worth pointing out OH and I aren't married, so for now, i want the flat to remain mine alone. No issues to confess, I just have divorced parents and want to have financial independance should I ever need it:o

The house is quite a bit more:eek:. At the beginning of this year the balance was £292k, it's on SVR (4%)and we can't really re-mortgage as it's probably sitting at about 90% LTV. I think it has about 19.5 years to run now. Payments are £1750 pcm. Whilst we were still on our tracker (ie paying 0% :T) we overpaid by £200 a month which helped take the balance down. But now we've gone back to SVR we took the overpayment out. OH then changed jobs for a big payrise so we are starting to think about overpaying again; plus I am starting to get serious about cutting money, doing surveys, using cashback sites etc.

My gut instinct says overpay on the house, but I can't figure out financially what makes more sense (which is a tad embarrassing being an accountant who works for a bank

Hope you lovely people can offer some help. Once I get serious I might start a diary as it seems to be very motivational. However a lot of the ones I have read so far were started years ago, and I get a little bit depressed by the size of the mortgages compared to ours. :eek:

*Jellie*

I'm new too so can't really offer any advice! Just wanted to say well done for delurking! We have a huge mortgage and are just staring out so you're not the only one!

greent

Personally I'd definitely go for personal mtge. BTL mortgage has tax benefits - and even more as you are a HR taxpayer. PLus getting a better LTV on personal property will reap rewards when/ if you re-mortgage in terms of what deals are available to you

mfmaybe

*Jellie* wrote: »

I'm new too so can't really offer any advice! Just wanted to say well done for delurking! We have a huge mortgage and are just staring out so you're not the only one!

Thanks for the welcome! Nice to know I'm not alone. Good luck with yours!

mfmaybe

greent wrote: »

Personally I'd definitely go for personal mtge. BTL mortgage has tax benefits - and even more as you are a HR taxpayer. PLus getting a better LTV on personal property will reap rewards when/ if you re-mortgage in terms of what deals are available to you

Yes I guess that is what I was thinking. This forum has helped already! Until I wrote it all down, I hadn't really considered the tax benefit or the LTV issue, as you cleverly point out. Thanks!

Now to start persuading OH this is the way forward. We are going on holiday next month and just emailed OH to ask if he wanted to pay to book seats (stupid BA new policy :mad:). It's only a 2 hour flight so I think not, but he said he wanted to. I told him that it would cost £40, but what I really wanted to do was tell him the mortgage equivalent. I guess I need to take £40*4%pa*19.5 years?

Does that sound right? (I'm now wishing I'd not 'fessed up to my career! In my defence this isn't the sort of accounting I do any more )

greent

mfmaybe wrote: »

Yes I guess that is what I was thinking. This forum has helped already! Until I wrote it all down, I hadn't really considered the tax benefit or the LTV issue, as you cleverly point out. Thanks!

Now to start persuading OH this is the way forward. We are going on holiday next month and just emailed OH to ask if he wanted to pay to book seats (stupid BA new policy :mad:). It's only a 2 hour flight so I think not, but he said he wanted to. I told him that it would cost £40, but what I really wanted to do was tell him the mortgage equivalent. I guess I need to take £40*4%pa*19.5 years?

Does that sound right? (I'm now wishing I'd not 'fessed up to my career! In my defence this isn't the sort of accounting I do any more )

Hmm - don't know - I know that in my case £40 paid off the mtge would take £60 off the end balance - so saving me £20 in interest. Others would save more (some would save £60ish) - depends on int rate/ term of mtge - ours is *relatively* short. I'd play with spreadsheets for that one, if I were you (can recommend financialbliss's)

abouttimetoo

Hi Mfmaybe, welcome to the board :hello:

Don't let the size of your mortgage compared to others get you down, there's lots of people on here with mortgages the same or higher than yours and also lots of single people with one salary overpaying on the mortgage. I can't remember the names of the threads but I know there are some threads on here about size of mortgages as well as who is doing it on their own so they might help your inspiration and don't forget it's all relative too.

You'll get loads of great advice here or a sounding board when you need it. When you get your plans in place there are also several challenges you might like to enjoy.

Regards
ATT

dexter_fan

Welcome and well done for the overpayments you have already made!

I would personally overpay your house mortgage. As others have said, there are tax benefits to your BTL mortgage and if you get your house mortgage down to a better LTV you will have more choices when you come to re-mortgage.

DF

mfmaybe

greent wrote: »

Hmm - don't know - I know that in my case £40 paid off the mtge would take £60 off the end balance - so saving me £20 in interest. Others would save more (some would save £60ish) - depends on int rate/ term of mtge - ours is *relatively* short. I'd play with spreadsheets for that one, if I were you (can recommend financialbliss's)

Thanks, I have found the threads and played around with the spreadsheets, they were similar to the ones I'd created but gave me some more ideas! I love a good spreadsheet

mfmaybe

abouttimetoo wrote: »

Hi Mfmaybe, welcome to the board :hello:

Don't let the size of your mortgage compared to others get you down, there's lots of people on here with mortgages the same or higher than yours and also lots of single people with one salary overpaying on the mortgage. I can't remember the names of the threads but I know there are some threads on here about size of mortgages as well as who is doing it on their own so they might help your inspiration and don't forget it's all relative too.

You'll get loads of great advice here or a sounding board when you need it. When you get your plans in place there are also several challenges you might like to enjoy.

Regards
ATT

That's good to hear, I will look forward to sharing the burden with some other debt-laden mites . As you say it's all relative though, and as OH are in the very fortunate position to have well paid jobs, we are not feeling stretched paying it - just rather beholden to it. Hence this new plan

mfmaybe

dexter_fan wrote: »

Welcome and well done for the overpayments you have already made!

I would personally overpay your house mortgage. As others have said, there are tax benefits to your BTL mortgage and if you get your house mortgage down to a better LTV you will have more choices when you come to re-mortgage.

DF

Thanks Dexter fan (great name, I presume you mean the books/TV series?!). Pleased to see others agree with me and yes the mortgage is fine while base rate is so low, but we should really be prepared for when it climbs again. :A