when your savings exceed your mortgage?

lilylaren

Just after some opinions/advice please.

Our situation is a little complex so please bear with me! I own a property that I currently let out - rent covers the mortgage and £300 left over each month.
I have just sold my inherited property now have a large amount of cash in the bank.(200k)
The orginal plan was to keep to btl running as is and use the large deposit towards a family home for us (was looking at roughly 30/40% ltv) however that didn't work as previous payday loans and two defaults each

we made the decision to rent for 1-2 years and have found the perfect home for us right now but in the meantime have a large amount of cash sitting doing nothing but I fear get dipped into.

the outstanding balance on the btl is £139k currently costing £375 per month in interest...we are not in a fixed term and from what ive read the repayment penanlty is 1%.

My initial thought was to clear the mortgage and start saving the monthly payments but worried about being able to release the equity when we want to buy...

I have also been approached by my broker to be involved in bridging loans? I haven't been to see him to discuss it further yet so if anyone has any advice on that front also welcome!

RickyC_IFSWP

So your real question is: what to do with the £200k? Repay your BTL and save the extra rental income OR keep £200k on deposit-based accounts?

Of the £200k, how much would you need to use for the future deposit? Clearly if you used some to clear your BTL mortgage, the rental income over 2 years would only give you around £17,000 (before tax) so this would reduce the deposit you have. If you need to use most of the £200k in future, then you're probably better off just looking for the best short-term interest paying accounts.

Also, when do your defaults/bad credits fall off your credit file? (1-2 years' time too?)

Re bridging loans - these are typically used for chain properties as a "bridge" in finance (i.e. selling your home and buying another place). They are expensive to arrange, so I can't imagine how these would work well in your situation.

Thrugelmir

Why not sell the BTL and combine the equity with your inheritance to buy a home for cash. Be mortgage free.

Renting a property is dead money. The inheritance isn't going to grow by much left on deposit earning a paltry rate of interest.

atush

I too am worried as previous defaulters that the lure of the cash will be great for you.

Clearing the mtg will be inefficient tax wise as you would increase the amt of tax you pay in the income. So selling or keeping as is could be key. I am assuming you can't move into this house yourself- ie is it not near?

So sell up and buy for cash, otherwise put the money into 2 yr bonds (apart from an emergency cash pot) so you can't spend it. or however long it will take you to get the defaults off your record.