BTL and Domestic Mortgages - Help!

paul5518

I have 2 BTL mortgages, one with and one without tennant. Both purchased with LTV of 80%, now more like 100%. No prospect of selling either. They were bought with a view to paying some of my domestic off in time which currently sits at about 170K. So the plan failed and the liability is weighing heavy because I am nearer retirement age than I would like (56).

To lower my gearing and reduce my exposure to the risk I have taken in lodgers, reduced my outgoing on domestic mortgage to interest only and maximised my return on savings rather than pay mortgages off whilst the balance of return on savings is favourable (thanks for the lesson Martin).

My simple mind would have it that when rates start to rise and surpass savings rates I should use my savings to pay off the most expensive loans which would be one of the BTLs. My fear is that this still leaves me with a huge domestic mortgage with little time to pay it off and equity in a BTL reducing in value.

My questions: Should I prioritise in favour of domestic pay off? What would happen if I walked away from the BTL completely? (I know the answer to that really I spose).

I bought these properties just before some bright spark coined the phrase "Credit Crunch" and have struggled ever since to come to terms with my own actions. Really really would appreciate an opinion on this from peopes. Many thanks.

Disgruntled of Shrewsbury.

brit1234

Sell them for the best price you can before the value falls anymore.

Trollfever

A failed business venture.

Cut your losses.

Thrugelmir

Pay down you own residential mortgage first. At least the interest on the BTL mortgages is tax deductible.

savinglikemad

hi I too am in a similar postion but fortunatly the other way round I have a suplus of cash and dont know which one to pay off first. But my views are as Martin always says pay of most expensive loans first. So even if they are tax deducable surely the int charged pays a big part on the calculation as say if private mortgage was .95 over base and BTL was 4 over base surely the BTL would be better paid off first as the tax deductable would still make it more expensive???

Crashandburn

To the OP - I'd try and let the unlet property for something rather than nothing. Nothing worse than pushing for a high rent to then see the property unoccupied for 2-3 months! If its meant to be £500pcm, £375-400pcm is way better than £0pcm! Be aggressive with the letting agents on price

JonnyBravo

Crashandburn wrote: »

To the OP - I'd try and let the unlet property for something rather than nothing. Nothing worse than pushing for a high rent to then see the property unoccupied for 2-3 months! If its meant to be £500pcm, £375-400pcm is way better than £0pcm! Be aggressive with the letting agents on price

Another vote for this.
Voids are the bane of BTLing so price under the market to ensure no void months.

Thrugelmir

savinglikemad wrote: »

hi I too am in a similar postion but fortunatly the other way round I have a suplus of cash and dont know which one to pay off first. But my views are as Martin always says pay of most expensive loans first. So even if they are tax deducable surely the int charged pays a big part on the calculation as say if private mortgage was .95 over base and BTL was 4 over base surely the BTL would be better paid off first as the tax deductable would still make it more expensive???

Any profit you make on the BTL income is taxable. So by reducing the BTL mortgage you are increasing the amount paid in tax. The cash to reduce the capital owed on the BTL mortgage is paid out of after tax profit not pre tax.

With a rate of .95% above base you are better off saving the money into an ISA or other deposit savings accounts, rather than repaying the residential mortgage at the current time. As there plenty of accounts with after tax rates higher than 1.45%.

Senior_Paper_Monitor

In the current market you are unable to let then there is something seriously wrong ...

with the price ? with the property ? with the letting agent ?

Recently had a client withsimilar problem - beat the sh*t out of the current agent, got a new one, had her to splash some paint on it and heh presto, problem solved.


As to the priority to pay down - need all your figures to give accurate answer (but in terms of strategy and protecting the important asset I suspect it will be the residential property)