Should we change mortgage on rental?

hhols

Hi just after a bit of advise really. We rent out my OH flat out interest on it is only 2.5% so at the moment we are paying off the capital and the rent we receive covers our agents fee (which we plan to opt out off) and ground rent, we make no further profit from it. My OH got made redundant last week and is now planning on becoming self employed. Would it be a good idea to change the mortgage to interest only in order to get a slight income from it (would be about £350 a month)? I'm unsure of tax implications or whether we would be better to try and muddle through and continue getting the capital paid off?

Doozergirl

Are you overpaying at the moment? Or are you just covering the interest & capital repayments.

If you're not overpaying are you sure it's a good idea to be letting it at all and not selling? The interest rate won't be 2.5% forever and if you aren't clearing anything on top of the interest & capital repayments then this could be a massive issue down the line as you will be subsidising it and may struggle at that point.

If you are overpaying the capital, is there not a compromise point instead of going IO?

I certainly would not move to IO. I view rent as only there to pay for the property so not available for other living expenses. It shouldn't be a cash account - you want the security of ownership when the mortgage is finished.

bris

You will struggle to find a BTL mortgage to give you interest only just now, even if they do it will be a lot more than 2.5% and with the fees involved then you will be much worse off.
Stay where you are .

InkZ

That's a great rate, I'd stick with it. You'll struggle to get an interest only mortgage under 75% these days so it also depends on how much capital you have in the property.