residential 2.99% mort or BTL 4.49% which to pay off first?

holly_hobby

No maximising tax efficiency is relevant for any tax payer with a BTL business, so I don't on this occassion agree with your approach, but you don't agree with mine, and thats the beauty of a discussion - each to their own and no one's offended.

Hopefully the various factors debated will help the OP, but as I say, I would expect them to float this past their tax practitioner.

Holly

ValHaller

holly_hobby wrote: »

No maximising tax efficiency is relevant for any tax payer with a BTL business, so I don't on this occassion agree with your approach, but you don't agree with mine, and thats the beauty of a discussion - each to their own and no one's offended.

Hopefully the various factors debated will help the OP, but as I say, I would expect them to float this past their tax practitioner.

Holly

So, standard rate tax payer needs £40,000 on a mortgage. Choice is:

• BTL at 4.49% before tax relief
• Residential at 2.99%, no tax relief

Which are you going to advise? The tax efficient one?

holly_hobby

Personally for a tax payer, release the 40k out of the BTL (subject to offset ceiling, rental income ratio's and perceived security of tenure), due to the tax efficiency.

Of course what also needs to be bourne in mind, is that in periods of unoccupancy, the btl mge will have to be met from personal income/retained business profits, so in that situ, or if there is a history of ad hoc unoccupany, the mortgagor may not wish to increase their BTL exposure or increase of associated mge payments, any further, regardless of the tax advantages when let.

Now, where the the mortgagor is NOT a tax payer, or only a negligible amount of the net rental income will be exposed to BRT, then the ball game changes, and it would be beneficial to drive down the BTL mge, as the higher payrate is simply erodding the net yield, without any real gain.

Hope this helps

Holly

ValHaller

holly_hobby wrote: »

Personally for a tax payer, release the 40k out of the BTL (subject to offset ceiling, rental income ratio's and perceived security of tenure), due to the tax efficiency.

Of course what also needs to be bourne in mind, is that in periods of unoccupancy, the btl mge will have to be met from personal income/retained business profits, so in that situ, or if there is a history of ad hoc unoccupany, the mortgagor may not wish to increase their BTL exposure or increase of associated mge payments, any further, regardless of the tax advantages when let.

Now, where the the mortgagor is NOT a tax payer, or only a negligible amount of the net rental income will be exposed to BRT, then the ball game changes, and it would be beneficial to drive down the BTL mge, as the higher payrate is simply erodding the net yield, without any real gain.

Hope this helps

Holly

Crazy. As a basic rate tax payer, you would take a 4.49% mortgage which would come to 3.59% after tax relief - over a 2.99% mortgage on which there is no tax relief. All because it is tax efficient. You would actually pay an extra 0.6% after tax efficiency, just to be tax efficient?

One of us is really missing something here and I am pretty certain it ain't me.

holly_hobby

Well lets leave it there then.

H

ValHaller

holly_hobby wrote: »

Well lets leave it there then.

H

Are you still not getting it or are you just embarrassed?

holly_hobby

Not taking the bait on this one.

Night.

H

ValHaller

holly_hobby wrote: »

No, I just don't want to be dragged into the argument or trading of insults, that you are so obviously angling for .. just haven't the energy, desire or inclination to waste on it.

Don't agree, not embarrassed or about to be bullied.

Move on.


H

I'm angling for an admission that you are wrong to promote the tax efficiency of a 4.49% btl mortgage over a standard residential mortgage at 2.99% for a basic rate tax payer.

Or a straightforward no-bluster explanation why a net cost of 3.59% is better than a net cost of 2.99%

ValHaller

holly_hobby wrote: »

Not taking the bait on this one.

Night.

H

I think it is I who have taken the bait.