Rental Investment: Should I pay off rental mortgage early?

edinburgher

You wouldn't get that in interesting-bearing accounts, unless you could open a number of Santander accounts with their 5% up to £20K and that takes a bit of work from what I've read.

Santander pay 3%. It was possible to get c. 5% from Nationwide and TSB, but this required a fair bit of juggling and might not suit OP if she is potentially able to pay down £156k in 6-7 years (higher rate tax may apply, reducing returns on these accounts).

atush

aggypanthus wrote: »

May I ask, isn't it worth having a rental property with little profit, just to benefit from the eventual sale ofit at the end of its term. ?

Not really, as there is capital gains tax to pay on sale profit. And no profit over the mtg to pay running costs.

So if you can't live in it, sell it. Esp once it gets close to the CGT limit. Something happens there, like void periods, damage/vandalism etc and it will be a cash drain and send you back into debt.

atush

debt-freeoneday wrote: »

Thanks atush for your reply, sadly we can't move back in as both properties are 80 miles away from where my husband's business is based. I'm self employed and my husband is a director of his own company so we don't have workplace pensions.

I'm definitely considering a S&S isa now and we are able to switch to repayment (we're on a consent to let, not buy to let) without having to apply for a new mortgage, so we could potentially do that.

If your OH is a company director, he can have a directors/executive pension. Paid by the company. Saving corporation tax. Nics etc.

Switching to repayment might just improve your credit score as you go along as wella s lowering LTV. Allowing you to perhaps sell, then port your mortgage to a property you could live in?

aggypanthus

atush wrote: »

Not really, as there is capital gains tax to pay on sale profit. And no profit over the mtg to pay running costs.

So if you can't live in it, sell it. Esp once it gets close to the CGT limit. Something happens there, like void periods, damage/vandalism etc and it will be a cash drain and send you back into debt.

our accountant said we made a loss last yr, one 1, but not to worry over it. I shall have to ask more about it. I am non tax payer and joint owner, DH pays tax.
Flat 2 is in his name onlý, would it benefit us to be joint owners ?

G_M

Property 1 is losing you money. You are paying the interest on the mortgage but that's all? What about running costs (gas cert? insurance? agents? etc)?
What if boiler breaks down; tenants leave and you have a 2 month void followed by tenants from hell? Not to mention the time/stress/hastle of running a business.

Sell it and invest in a pension for tax beaks.

Spidernick

G_M wrote: »

Sell it and invest in a pension for tax beaks.

That's not the bird brain idea it might first sound!

(And yes, I realise now I got the Santander interest rate muddled up earlier, so am far from perfect myself).

aggypanthus

G_M wrote: »

Property 1 is losing you money. You are paying the interest on the mortgage but that's all? What about running costs (gas cert? insurance? agents? etc)?
What if boiler breaks down; tenants leave and you have a 2 month void followed by tenants from hell? Not to mention the time/stress/hastle of running a business.

Sell it and invest in a pension for tax beaks.

it full repayment mortgage. We had a 3 month void, had to buy furniture and fridge freezer. Yes, ins, ad fees etc.

seemed a good idea at the time!

so we weill own it outright in the end, cant b bad surely?

atush

aggypanthus wrote: »

our accountant said we made a loss last yr, one 1, but not to worry over it. I shall have to ask more about it. I am non tax payer and joint owner, DH pays tax.
Flat 2 is in his name onlý, would it benefit us to be joint owners ?

Very much better in both names- 2 cgt exemptions, and your income from the property isn't taxed. Get it in both names.

atush

aggypanthus wrote: »

it full repayment mortgage. We had a 3 month void, had to buy furniture and fridge freezer. Yes, ins, ad fees etc.

seemed a good idea at the time!

so we weill own it outright in the end, cant b bad surely?

Paying tax, will pay cgt, not currently making a profit. Pensions are better.