off set mortgage for BTL?

slinkymalinki_2

Having a bit of a think and would like to reorganise my finances.

When my dad died 4 years ago I inherited some money. I decided to use some of the money to send my daughter to an independent school and used the rest to buy a house as an investment. My original idea was to refurbish it and sell it to increase the capital and provide myself with a bit of income, however the market died so I have kept it let for the past few years. This does give me a better return than having it in a savings account but it means all the capital is all now tied up.

I took out a small buy to let mortgage to release some capital but have resisted getting more out as it is expensive to arrange and there seems to be much fewer BTL mortgages around anyway. I think the best thing would be to get an off-set mortgage as I only need a bit out at a time and don't want to spend money on interest which would only be sitting in a savings account earning diddly squat. We already have a One Account for the house we live in and they have told me that I can only have one account like this. I have not been able to find anything similar.

I would quite like to sell the house but I think it would be hard to find a buyer at present and I may have to sell it for less than I paid out.

Any ideas?

Thrugelmir

The interest payable on the BTL mortgage is offesetable against the rental income for tax purposes. So having an offset mortgage makes little sense.

If the rental income from the property means that you are in the higher rate tax band. Investing some money into a pension scheme may be worth considering. As you'll benefit frm tax relief at 40% on your contributions.

Alternatively use the after income to repay your one account mortgage.

A property is not an investment its a business, so I would never compare one to a savings account. The property carries a multitude of risks which is why the return is higher.

getmore4less

Thrugelmir wrote: »

The interest payable on the BTL mortgage is offesetable against the rental income for tax purposes. So having an offset mortgage makes little sense.

That implies you should always borrow the maximum, borrowing less or offseting have the same effect but the former gives access to funds at the mortgage rate.

..........

Alternatively use the after income to repay your one account mortgage.

dpends on rates the tax saving is not always the best option

A property is not an investment its a business, so I would never compare one to a savings account. The property carries a multitude of risks which is why the return is higher.

NEEDS to be higher

Plenty of BTL that are producing gross yields 5% and below

Thrugelmir

getmore4less wrote: »

That implies you should always borrow the maximum,

If you can make a better return on the money elsewhere, then yes.

In the same way that a Company borrows money to buy a piece of equipment. The higher output results in increased sales which generates yet more profit.

If not then the cash generated from running a business is better used in repaying debt.

Thanks for correcting my "words". I've been working today and its been a long one to. :beer:

getmore4less

Thrugelmir wrote: »

If you can make a better return on the money elsewhere, then yes.
.............
If not then the cash generated from running a business is better used in repaying debt.

Thats why an offset can be so attractive for a business,

You can create and remove the debt for no cost at rates cheaper than most other options.

Gorgeous_George

The interest is offsettable against tax if the mortgage was in place at the time that theproperty was first let. Otherwise, it isn't.

If you do not wish to sell because you would make a loss, keeping it may just increase your losses. In poker, you need to know when to fold.

GG