Overpaying versus save for a BTL deposit

adidas

Hello


Just wondered what your thoughts would be about overpaying my mortgage versus saving for another house deposit to use as a BTL deposit?


I already have some S+S investments and wanted to diversify. Wondered what peoples experiences have been. Has anyone done this whilst paying their usual residential mortgage?

Would be interested to hear your views.

Thrugelmir

Very much a personal decision as to how much risk you wish to take.

For the majority of people owning their home outright with no mortgage is the priority. As gives a huge amount of security and removes the stress of income levels. The mortgage being the largest single outgoing.

dimbo61

Not simple or easy being a Landlord.
If you pay off your mortgage early you may sleep better in your bed at night.
You maybe able to retire early ( no mortgage) work part time!
Take a job with less pay and stress or like me consider how FIT I need to be to lift and carry up and down stairs until I am 68.
Are you a risk taker ? Can you take on the problems of being a Full time landlord.
You would need a 20/25% deposit and money for fees etc

Bufger

You also need emergency funds to cover for the maintenance and repair of 2 properties. You cant leave a tenant in the lurch because you've made an investment but dont have the cashflow to keep their living conditions at a suitable standard.

Mallotum_X

Risk decisions aside.

You may benefit while you save if you consider an offset mortgage (depends if you are in a tie in period at the moment). The offset savings earn no interest but save you interest on the mortgage. Clearly it will depend on the rate you are paying compared to the post tax returns you could earn.

adidas

Thanks for mentioned the offset option. I had forgotten about that. Balancing all sides of the argument I think the best option is to pay everything towards the mortgage, whilst interest rates are low and then go BTL. Certainly would be lower risk. I spent a long time working out the benefits of BTL. I think the yield would need to be substantially higher for a BTL to work whilst paying the mortgage as unpaid mortgage is still growing at say 3-4% and yield might be about 7%.


If the money for the deposit for BTL was available upfront, it would be worth it but unfortunately not in that situation.


Thanks for advice everyone.

Thrugelmir

A gross rental yield of 8% to 10% needs to be the starting point. As letting property is no different to any other business. There's big rewards and also big risks.

With the incoming changes to pensions. There's no reason for not maximising the tax advantages. Before opting for more volatile homes for ones money.

Yorkie1

You may not be thinking of doing this, but if you are considering reclaiming your overpayments at a later date for the BTL deposit, don't assume that you will be able to do so. Others have reported T&Cs changing so that overpayments will no longer be repaid.

dimbo61

Again a good case for an offset mortgage as you pour any spare money into the offset account.
Build up the 25% deposit needed and pounce when the right property comes up.
Do you homework and get an Interest Only BTL with a good yield from the rental.
This is a long term investment so 15/20/25 years.