Which mortgage to attack first, or all at once?

Hi.
I have 3 mortgages currently.
My family residence, approx. £240k owing
BTL 1 60k owing
BTL 2 90k owing

BTL 1 is currently on repayment at £411 per month
BTL2 is on IO at £173 per month
I am allowed to overpay on BTL 1 at 10 percent of the original loan amount £70k per year.

I would like to clear these mortgages off earlier than the 25 years they were taken out for and was planning to clear off the smallest first, with the difference in rent from BTL2 to the mortgage payment on it, and make up the 7k overpayment allowed each year from my own other funds.
Then when this is paid use all the rent from BTL 1 (then mortgage free) and BTL 2 to overpay BTL 2 mortgage til clear, then the rent from these to pay whatever is left on my main mortgage (which I have been making ad hoc overpayments on)

Does this sound like the best course of action. My thinking is that at least I will see the benefit of overpaying one first as it will then be mortgage free completely rather than paying a bit off each IYSWIM.

Or appreciate any better ideas?
Thanks for any input

Replies

  • megelamegela Forumite
    755 Posts
    Ninth Anniversary
    ✭✭✭
    Mortgage interest is tax deductible on the BTLs, you'd be better to leave the BTLs and overpay your main mortgage.

    Good luck whatever you decide.
    Re-mortgaged 20/04/12 MTiT-T3 No.7
    Start balance £89611.10 + £22500 = £112111.10/Current balance £85436.53
    Original Mortgage Free Date April 2032
    Target Mortgage Free Date July 2022/Currently August 2029 (based on no offset)
    Total overpayments from 20/04/12: £8152.95
  • JPS29JPS29 Forumite
    1.6K Posts
    I understand that, but In my warped head I prefer to take the easy route. And as it would be easier/quicker to pay the other 2 off I am thinking of this. TBH I am making overpayments on my main mortgage anyway and expect to clear it before its term regardless of the BTL's
  • muddywhitechickenmuddywhitechicken Forumite
    3.9K Posts
    Eighth Anniversary 1,000 Posts Combo Breaker
    ✭✭✭✭
    Are they all at the same interest rate?
    Mortgage at highest (April 2008): ~£195,000
    Outstanding balance: <£29,500 :j
    Current total overpayments: ~£128,750
  • JPS29JPS29 Forumite
    1.6K Posts
    No, BTL 1 invoked a clause for exceptional circumstances so put it up to about 4.25% I think( its been a long day) that's skipton
    BTL 2 base rate plus I think 1 percent but will double check however this is with mortgage express (Bradford and bingley) so no limit to overpayments as they have waived charges since nationalisation
    Main residence is 2.99% currently (tracker)
  • muddywhitechickenmuddywhitechicken Forumite
    3.9K Posts
    Eighth Anniversary 1,000 Posts Combo Breaker
    ✭✭✭✭
    I don't have BTLs (so I don't understand the tax implications) but plenty of people on here do - I'n sure they'll be along later with some good advice.

    (If it was me, I'd OP the mortgage with the highest interest rate)
    Mortgage at highest (April 2008): ~£195,000
    Outstanding balance: <£29,500 :j
    Current total overpayments: ~£128,750
  • FloppyDiskFloppyDisk Forumite
    855 Posts
    Eighth Anniversary 500 Posts
    ✭✭✭
    JPS29 wrote: »
    I understand that, but In my warped head I prefer to take the easy route. And as it would be easier/quicker to pay the other 2 off I am thinking of this. TBH I am making overpayments on my main mortgage anyway and expect to clear it before its term regardless of the BTL's

    Hi JPS29, it's tricky isn't it but as a businessperson it is probably worth 'un-warping' your head because you're going to be losing profit in the long run. It would perhaps even be worth changing your repayment BTL to an IO and chuck everything at your own home - that is the most tax efficient use of your cash.

    Remember your BTLs are there to work for you, not the other way around.

    Mortgage Apr 18 £417,894 BTL Mar 18 £162,857
    Mortgage now -- £381,110 BTL now --- £161,710
  • JPS29JPS29 Forumite
    1.6K Posts
    Thanks Floppy.
    It's kind of forward planning that has got me thinking this way.
    At the moment BTL1 just washes it's face (as in covers the mortgage) I receive £100 p/w for it.
    Should/when interest rates rise in the future then I would be subsidising the mortgage which is a position no one wants to be in.
    Equally with the balance being higher on btl 2 a rise in interest rates again, or/and being forced on to repayment would mean me funding again.
    BTL 1 achieves the maximum possible rent for the area so could not survive a rental increase, BTL2 could go up but only very small amount and as I have a long term tenant that has been there for 6 years I am happy for it to stay as it is for the foreseeable.
    If I had a portfolio of 15+ properties then I know it would be madness but as there are only 2 and the figures are low (relatively) then I think I can live with the potential loss in future profit.
    My main house will be getting attacked anyway so I'm not too worried about that plus it would take a lot longer to be mortgage free on that one property when I could be mortgage free on 2.
    I do appreciate your input.
This discussion has been closed.
Latest News and Guides