Which property to overpay?

Lisa1978

I own 2 properties :


Current home we live in - Mortgage £123k, 29 years, monthly payment £656.


Apartment we let out - Mortgage £108k, 29 years. Monthly payment £595


As from the new year we will be able to put aside £200-£300 for overpaying mortgage. Should I put it all into our current home or part into the apartment. We want to sell this asap but current values are around £85-95k. The problem is it does cost us £200 a month to keep. Therefore if we overpay it will be costing more but we can get sell it quicker. Don't want to be throwing good money after bad. We made the move as we had the deposit to move from a 2 bedroom apartment to 4bedroom house in better area with our baby.

I should mention our current home, is worth approx. £180-200k now.... which leads to should we re-mortgage, and get rid of apartment now so we no longer need to pay the £200/month?

thanks.

steeeb

What're the interest rates?

You'll want to take into account the interest amount that you deduct from your BTL property for HMRC. So if they're both the same interest rate it'd generally be more efficient to overpay your residential property.

Obviously more factors to consider.

ACG

Assuming you declare the rental income to HMRC then I would be more inclined to pay off your own mortgage - as you can offset the interest on the BTL against the tax you pay on the income.

Assuming you do not declare it then I think I would be leaning towards paying off whichever has the higher interest rate.

But its always worth sitting down with a professional (accountant of broker) to determine which is the best to overpay.

Lisa1978

Thanks for the reply :


Residential : 4.79% Halifax


Apartment : 4.99% Alliance & Leicester

Lisa1978

ACG wrote: »

Assuming you declare the rental income to HMRC then I would be more inclined to pay off your own mortgage - as you can offset the interest on the BTL against the tax you pay on the income.

Assuming you do not declare it then I think I would be leaning towards paying off whichever has the higher interest rate.

But its always worth sitting down with a professional (accountant of broker) to determine which is the best to overpay.

Yes, rental income is declared to HMRC via SA.