Disadvantage of paying mortgage off !! 14 December 2014 at 6:17PM in Mortgage-free wannabe 13 replies 2.4K views

sam1970

We are moving abroad next year and I will be looking at renting our house out. I can pay what is left of my mortgage off before we go but is there any disadvantage to doing that? will I be better off keeping the mortgage going ( I pay only 0.5% above BOE rate for life)

Savingdad

The main disadvantage I can see is you can earn a lot more interest than you would save if you used some of the high interest current accounts currently on offer to stash the money you would use to pay off the mortgage.
3%,4% and 5% are all on offer form various places at the moment.

steampowered

Most mortgages don't let you be a landlord - your lender might put you on a higher rate if you want to let it out.

sam1970

steampowered wrote: »

Most mortgages don't let you be a landlord - your lender might put you on a higher rate if you want to let it out.

I am not planning to tell them anyway. As long as I am making them the monthly payment I dont think they will care....I will not be the first one to do that

notanewuser

sam1970 wrote: »

I am not planning to tell them anyway. As long as I am making them the monthly payment I dont think they will care....I will not be the first one to do that

This doesn't have disaster written all over it at all...............

Dunnit

You can offset the interest against the profit you will make so you would be bonkers to pay it off.

sam1970

Dunnit wrote: »

You can offset the interest against the profit you will make so you would be bonkers to pay it off.

Thanks a lot..that is what I thought

haras_nosirrah

if you don't plan on telling your lender you had better hope your tenant is extra careful

your buildings insurance policy will be invalid (landlord ones have a clause about the lender being aware)

why don't you see if your lender will give you consent to let the property? You then don't have to worry that if you annoy your tenant they will dob you into the lender

sam1970

Because the lenders are very greedy and they deserve it. two years ago I thought about renting my house out and I thought I will do it the right way so I informed the lender. They refused permission and wanted to move me to BTL mortgage. My rate was 0.5% above BOE and they wanted to move it to over 6%..Obviously I did not bother

Vectis

sam1970 wrote: »

Because the lenders are very greedy and they deserve it. two years ago I thought about renting my house out and I thought I will do it the right way so I informed the lender. They refused permission and wanted to move me to BTL mortgage. My rate was 0.5% above BOE and they wanted to move it to over 6%..Obviously I did not bother

That doesn't seem like a particularly good reason for not doing it properly. You're putting yourself and your tenant at risk. Aside from making your insurance invalid (unless, of course, you're skimping there too and not getting landlord's insurance), the mortgage company can foreclose on the mortgage if and when they find out. If that happens it puts your tenant at risk too.

Many tenants are more savvy these days and are asking to see the LL's permission to let - it's what you're advised to do as a potential tenant.

Of course, you can take a chance and maybe get away with it, or you could do it properly and be a responsible landlord to your tenants.

lulabelle1

Sounds like a ploy to avoid paying tax to HMRC? (illegal of course but I presume you've popped HMRC in the greedy box along with the lender?)