Automatic overpayment to offset BTL

kiridoh

Hi All,

I'm saving to buy an investment property and currently doing some calculations.

According to my figures, including council tax and maintenance expenses, I will make a small profit each month (well below the fiscal requirements) but I was thinking I could use that to overpay the BTL mortgage. By nature of the investment, this amount will change every month, i.e. it could be null because it was all used for maintenance or a couple of hundred quids.

Is anybody aware of financial institutions which would accept a monthly instruction to "pay whatever is left on the account" as overpayment?

Thanks

kiridoh

Does anyone have an idea?

scottishblondie

Never heard of it. Probably best just to make a manual overpayment if your provider will allow it. Personally speaking I would keep the money in a savings account for unexpected or larger bills at the property, to pay the mortgage with if your tenant stops making payments, and to pay any tax you are liable for.

Also why are you including council tax as an expense? Your tenant will be liable for it, unless you are planning on having an HMO property.

Let_Us_See

Many landlords pay council tax to ensure it gets paid in full and on time. Then simply add a little extra to the rent to cover the expense.

No lender is going to accept "odds and sods" leftovers at the end of the month.

amnblog

Why would you want to do this?

Thrugelmir

You'd be better off holding the cash as a reserve against tax and contingencies, such as bad paying tenants or unexpected repair bills etc.

kiridoh

amnblog wrote: »

Why would you want to do this?

to pay off the mortgage earlier?

kiridoh

Thrugelmir wrote: »

You'd be better off holding the cash as a reserve against tax and contingencies, such as bad paying tenants or unexpected repair bills etc.

That's definitely the plan, but once I had the "reserve" I plan to put aside, I don't want to hold the extra money onto an unfruitful savings account, but rather pay the mortgage off earlier

kiridoh

scottishblondie wrote: »

Also why are you including council tax as an expense? Your tenant will be liable for it, unless you are planning on having an HMO property.

Sure the tenant will, I was more thinking about a "reserve" to build up for the weeks where the apartment is not rent (i.e. in between tenants) so I can cover the cost by using what was paid as rent.
Any quid on top of the reserve, can then be used to pay the mortgage off earlier.

TrickyDicky101

kiridoh wrote: »

According to my figures, including council tax and maintenance expenses, I will make a small profit each month (well below the fiscal requirements)

What do you mean by "well below the fiscal requirements"? If you make a profit, and assuming you already work and have thus utilised your PA for the year, you will need to pay tax on the profit.

Bear in mind that not all of the expenses (such as Council Tax) can be deducted from your gross rental income in calculating your profit figure.

kiridoh

TrickyDicky101 wrote: »

What do you mean by "well below the fiscal requirements"? If you make a profit, and assuming you already work and have thus utilised your PA for the year, you will need to pay tax on the profit.

So say for example I pay £10k mortgage and get £11k rent, will I have to pay taxes on £1k? I thought there was a threshold of about £4k or so?