Should i pay off buy to let?

tingly

Hi there
I have a 60k mortgage on a buy to let property(which i hate but its a long story)
The 400 a month from rental i get from this pays off its monthly mort , bills n repairs etc (mort is about 300k£

I have got 60k coming out of a fixed rate bond which has paid me 5 pc gross, in Oct

Being as interest rates are so low and i need the income should i pay off the house i rent and keep the rental income


This then means i fully own a house i hate, and one day wish to get rid of....are there any downsides apart from psychological?
Thanks

Rafter

Tingly,

All depends on your tax situation.

If you pay off the mortgage, you won't be able to offset the mortgage interest against the rental income for tax purposes.

Against this you will be paying tax on your savings however, except for the bits you have put beyond the taxmans reach in ISAs.

Generally as the rate on your BTL mortgage will now be significantly more than you can earn on a savings bond you are probably best to repay and then you will own the property outright.

Looking at your numbers it doesn't look like the rental yield on the property is great, assuming you have a fairly chunky deposit tied up in it - so longer term I would look to get rid if house prices look favourable.

Good luck

R.

grey_gym_sock

it makes investment decisions more difficult if you hate an investment. or if you fall in love with it. better to be dispassionate about it.

if the only choice for the £60k is to pay off the mortgage or keep the cash on deposit, then as rafter says, you're probably better paying off the mortgage. you can confirm by calculating the projected interest paid and earned and the tax deductions available.

other options are to invest the £60k elsewhere (with the aim of achieving a return higher than the cost of the mortgage). or to sell the BTL now (since the yield seems poor and you hate it).

incidentally, you already fully own the house, in the sense that, if its value goes up or down £10k, that's 100% your gain or loss, not the mortgage lender's.

kidmugsy

grey_gym_sock wrote: »

incidentally, you already fully own the house, in the sense that, if its value goes up or down £10k, that's 100% your gain or loss, not the mortgage lender's.

Indeed, you already fully own it in the sense that you own it, in spite of the tired and inaccurate cliche people like to trot out about the mortgage company owning it. It's you that has to take care of council tax and any capital gains tax; it's you that will be sued, or jailed, if something goes badly wrong; it's you that decides whether to let it, or occupy it, or sell it, or gift it away. You ruddy own it. (This is yet another financial issue in which The Man in the Pub speaks brain-dead rubbish.)

JohnRo

You own the debt that bought the house, if you can't service that debt then you won't own the house for long. The terms of the mortgage dictate what you can and cannot do with it.

If you bought the house outright then you own it.

ds1980

What about people who rent? Do they own the house while doing so?

planteria

clearly not.

but for the original poster, it's all about just crunching the numbers. fwiw, if you really hate it, i would sell it. then use your equity, and your £60k, to invest in something else.