to overpay or not - help 22 February 2013 at 9:34AM in Mortgage-free wannabe

haras_nosirrah

Hi all

I have asked this on the mortgages board but didn't get a response

I am a big advocate of overpaying and have done so for a while - currently have 10k sat in my residential mortgage overpayment pot. I can only get it back by underpaying (nationwide) which has made me think

I have a btl mortgage at 6.29% with circa £103,500 outstanding
my residential mortgage is at 3.39% with circa £89,000 outstanding (and 10k overpayment pot) I am a lower rate tax payer

If I underpay my residential mortgage by £500 a month to use up the 10k and pay it into the btl mortgage instead could I claim the business expenses on the £500 a month interest as I am borrowing it from the residential property e.g. converting £500 a month from the btl mortgage rate of 6.29% to the residential mortgage rate of 3.39% - I know people can take lump sums out of the residential property to pay off the btl mortgage and claim the tax relief but would it work for lump sum payments?

I asked Nationwide if I could take out a lump sum but they said no as I have just gone part time and they won't use my work commission as it is unproven on a part time wage (earned 14k commission last year)


I also have nearly 10k in an isa currently earning 3% but from April will prob be earning next to nothing - should I put half of this into the btl as well (I know I can't claim tax relief on this bit). Would keep back 5k emergency money.

Before I do anything stupid just want to check I am not missing anything. My rental business makes a loss of about £600 a year after expenses so the tax implication won't be too much of a factor.

Can anyone help as to whether this is a sensible thing to do and does anyone know the rules on the tax relief side of things?

All my credit cards are on long 0% balance transfers so not the priority at the moment

Thanks