Change to Repayment?? Please help!

Lisa1978

Hi all,

Looking for some advice. I have a property that am about to let out. I have contacted my mortgage provider and they have sent out a form to complete for 'consent to let' and i have a fee of £295!!!

My mortgage is in negative equity. Mortgage is £94k, house to be realistic is worth approx £80k (even though neighbours have houses up for £100k). I am currently on Interest Only at 4.24% standard variable rate. My question is this, should i change to repayment? I am guessing with being in negative equity i will find it difficult to get a good deal! I have already requested a few times for it to be changed and they are awaiting me to send £75 to change it but now i'm unsure. Can i instead overpay? The repayment would put the mortgage up by £65/month to £495. Would i be better instead overpaying by say £50/month?

Really appreciate any advice, thanks

HappyMJ

If you are going to let it out the best strategy for tax reasons is to pay as little off the capital as possible. Save the money elsewhere.

Lisa1978

I have heard that before - i guess due to Corporation Tax?? Thanks HappyMJ. Just a little worried that at the end of it i could still owe £10-20k, but i guess i should keep the house as an investment as opposed to let out for the 2years only that i was expecting to do so. Thanks

Wh05apk

Do you have your own residential mortgage, on a property you live in? if so probably nbest to use any spare funds to reduce that down, as a BTL you will be unlikely to get a better rate, certainly not until the LTV is down to 65-70%, so stay put 4.24% (abbey?) is not a bad deal, also you are free to repay at anytime.

getmore4less

You might want to check the tax relief situation, normally it is on borrowing up to the value when first let but might be ok for the current full mortgage.

Don't let the tax relief drive not paying off debt, it still make you more money just choose the highest net rates.

If they want to charge to go to repayment just overpay also gives you control over the payments.

With the current negative equity you are stuck with what your current lender will offer you.

Nothing to do with corporation rental profit counts as personal income.

Thrugelmir

HappyMJ wrote: »

If you are going to let it out the best strategy for tax reasons is to pay as little off the capital as possible. Save the money elsewhere.

If letting the property does not make a profit then there's no tax to pay. If there's no after tax profit there's no cash to save.

Lisa1978

Wh05apk wrote: »

Do you have your own residential mortgage, on a property you live in? if so probably nbest to use any spare funds to reduce that down, as a BTL you will be unlikely to get a better rate, certainly not until the LTV is down to 65-70%, so stay put 4.24% (abbey?) is not a bad deal, also you are free to repay at anytime.

Yes, my husband and I have bought an apartment which we live in. Again, due to the time when we bought 3years ago, the property is in negative We paid £125k, put down £13k, took out Interest Only which we only changed 3months ago to repayment. That changed the monthly repayments from £530 to £590/month. So, i guess what you are saying is overpay the apartment mortgage with any spare cash and leave the house mortgage IO as it is? We do not make a profit from the house, it actually costs us approx £10/month to keep on but cannot sell. Thanks for all info

getmore4less

You would normaly overpay the one that gives the best return.

Your own mortgage seems to be high rate £112k i/o £530pm is 5.7%, £590 is a 40y term

getting the own residence out of negtive equity will be the best option.

What is the lenders view on long term letting, some like to increase interest and charges at some point.