Overpayments & being a Landlord do not mix..

Alias_Omega

Remaining Balance - £23,300 with 1 year remaining on a fixed rate deal of 6.08%. Was initially fixed for 5 years.

Calculating the potential payments using Nationwides's website. (http://www.nationwide.co.uk/mortgages/calculators/mortgagerepayments.htm)

The best 5yr rate they offer is 3.79% with £0 fee's.

£23,000 taken over 15yrs brings back a payment of £167, with £72 interest
only.


£167-£72x12x15= £17,100


(Payment - Interest x Months x Years)


£23,000 taken over 7yrs brings back a payment of £312, with £72 as interest
only.

£312-£72x12x7= £20,160

*The mortgage interest can be
deducted as an allowance expense.

Trying to over-pay the mortgage and be MFW will certainly hurt the pocket, as its cheaper on the pocket to have a long term mortgage, as the tenant pays the interest....

InsertWittyName

Don't forget the interest is also tax deductible...

toerag33

We struggle with the argument of paying it off or not ... We are taking the long term view and trying to have the LTV at a level so we are able to remortgage when the time comes. Ideally would just like it paid off so it is not a worry when there is no tenant in it!

Good luck with the conundrum

ViolaLass

Alias_Omega wrote: »

Trying to over-pay the mortgage and be MFW will certainly hurt the pocket, as its cheaper on the pocket to have a long term mortgage, as the tenant pays the interest....

The tenant pays you some money each month. It's up to you whether you then spend that on interest or not. Either way, you still receive the money.

And yes, it's tax deductable but that only gives you a 20% discount. You still have to pay the other 80%.

Alias_Omega

ViolaLass wrote: »

The tenant pays you some money each month. It's up to you whether you then spend that on interest or not. Either way, you still receive the money.

And yes, it's tax deductable but that only gives you a 20% discount. You still have to pay the other 80%.

I think it would be pretty bad if you did not use the interest part of the mortgage as an allowable deduction. Potentially throwing away free £££.

The "20%" you quote is a bit low, as before we started to make overpayments. We were paying £180 interest per month, on a £300 mortgage.

real1314

ViolaLass wrote: »

The tenant pays you some money each month. It's up to you whether you then spend that on interest or not. Either way, you still receive the money.

And yes, it's tax deductable but that only gives you a 20% discount. You still have to pay the other 80%.

That depends on the tax rate. It could be 60% or even 50% left to pay if it's a non-company BTL. :cool:

Alias_Omega

Residental mortgage, with Consent to Let.

ViolaLass

Alias_Omega wrote: »

I think it would be pretty bad if you did not use the interest part of the mortgage as an allowable deduction. Potentially throwing away free £££.

The "20%" you quote is a bit low, as before we started to make overpayments. We were paying £180 interest per month, on a £300 mortgage.

The 20% is the tax i.e. if you claim you've paid £180 in interest in one month, that will remove £36 from your tax bill. You'll still have to pay the £180 in interest though. Net loss on that section: £144.

I agree that if you need to pay interest, you should claim the tax deduction but if you don't need to pay interest, it's cheaper not to pay it and not claim it as part of your tax (because although you won't pay the £36 tax, you also won't be charged £180 interest).

real1314, point taken, though the principle still stands.