First post! Pay off residential mortgage vs BTL?

Jonbvn

What are the interest rates on the loans and mortgages?

My instinct would be that the personal loan will have a much higher interest rate, and you should pay this off first. How inflexible is it exactly?

mfmaybe

The loan is higher, yes (think it's at about 7%) but it was a staff rate loan so not astronomical. However I only took it out a few months ago so it still has 3 years to run. It's totally inflexible in that I can only pay it off as per the schedule, or in full (like the majority of personal loans I believe). I have already worked out that it would be nearly 2 years before the overpayments I can make would allow me to pay off the remaining loan in full, on top of the regular payments. Due to the way the interest is calculated, it really won't save that much in interest, £300. However if I put the same amount into my mortgage for the same length of time, it knocks 6 months off the repayment and saves several £k of interest.

If I had the money right now that would be great, but unfortunately I don't

getmore4less

I can't see the rate on the BTL depends on rates which is best.


A guess

£40k £204pm 13years would be around 6% interest only

So £1k off this mortgage would result in £60 of extra taxable income and a £24 tax bill £36 saved.

£1k of the 4% mortgage save £40.

RenovationMan

Yay! Someone with a mortgage that's bigger than mine! Welcome to MFW!

I'd say that your priority is the same as mine, to get your LTV down so that you can get a decent mortgage rate, especially when rates finally start to rise. You could remove some equity from your BTL and move it onto your main mortgage to get your LTV to 80%, which is a level where you can get an OK rate. 75% would be even better.

My mortgage is now £270k and costs me £571 per month (though it is an interest only) which gives me plenty of room for manouver for making overpayments.

uzubairu

I wouldn't be concerned too much about the size of your mortgage, as it is all relative.

A single person with decent income and a smaller mortgage may find it more difficult than 2 people with a larger mortgage and decent incomes (since the initial monthly costs are shared).

Good luck with your challenge, you have come to the right place for advice.

mfmaybe

RenovationMan wrote: »

Yay! Someone with a mortgage that's bigger than mine! Welcome to MFW!

I'd say that your priority is the same as mine, to get your LTV down so that you can get a decent mortgage rate, especially when rates finally start to rise. You could remove some equity from your BTL and move it onto your main mortgage to get your LTV to 80%, which is a level where you can get an OK rate. 75% would be even better.

My mortgage is now £275k and costs me £571 per month (though it is an interest only) which gives me plenty of room for manouver for making overpayments.

Ummm - thanks Glad to be the most in-debt person here :eek:. Not really;), as others have said it's all relative and I don't lose sleep over it!

I don't want to move equity from the flat as that belongs to me only and I'm not currently prepared to "give" half of that to my OH. If it ever gets desperate in terms of remortgaging I might; but because I work for a bank we get slightly favourable rates anyway, so hopefully it will never come to that.

RenovationMan

mfmaybe wrote: »

I don't want to move equity from the flat as that belongs to me only and I'm not currently prepared to "give" half of that to my OH.

What's the legal set up around your mortgage? Is it in both your names, is it paid from a joint account? I assume you're not married?

mfmaybe

No we're not married, though that's by choice

House and mortgage are both in joint names, yes. But to be honest I'm really not considering taking equity out of the flat right now.

dapss

Hi
Sorry for joining this thread later - it came up in my google search today!!

I have been debating whether to overpay my residential mortgage (1.99%) or my buy to let (4.79%).

I understand there are tax benefits with BTL - but when I do some sums it seems that overpaying the BTL, still makes more sense.

For example, if I had £10k to invest -

Residential - 10,000 x 1.99% = £199 saving

BTL - 10,000 x 4.79% = £479 saving
BUT £479 x 20% extra tax = £95.80 cost
Net Saving - £479 - £95.80 = £382.20 saving


Am I missing anything?
are there any other reasons to overpay residential before BTL mortgage????

Petal88

Ha I got pretty excited finding a MFW with a mortgage nearly as big as mine and then realised this thread is from 2010 and their mortgage is probably a lot smaller by now

mfmaybe are you still around for an update?