Should we stay with interest only mortgage

chasherell

Hello,
Please bare with me I'm new to this.

We have a property which we used to live in but, in 2013 we moved house and decided to keep our old property and rent it out. My concern is having an interest only mortgage. I have said over the years I think we should change the mortgage but have not got around it. My husband recently phoned the mortgage company for advise. Would we be better off staying with the mortgage we have or changing. They said due to the fact that we are now renting the property out we would have to change to a buy to let mortgage which would be worse, so to stay as we are. Is this the case only I'm worried we will be paying this mortgage for ever as we are only paying off the interest.

benjus

Does the mortgage allow overpayments? If so you can effectively convert it into a repayment mortgage by paying more each month.

bebewoo

You should be offsetting the interest against tax.

Pincher

Since you have somewhere to live, all you do is sell the house when the price is right, and the mortgage is paid.


The people who should worry are the ones who have nowhere to go when the mortgage matures, and can't pay the mortgage off.

brit1234

chasherell wrote: »

My concern is having an interest only mortgage.

What's your repayment vehicle for the interest only mortgage, ie shares, pension lump sum?

I wouldn't worry if they let you keep your consent to let and you have a repayment vehicle. The problem comes with those who don't have repayment vehicles which you are meant to have with interest only, if you haven't I guess you should sell.

Beckyy

It depends what your plan is. If you want to eventually own the house mortgage free then you need to look at some sort of repayment vehicle, however from a landlord point of view an interest only mortgage is exactly what you want. You offset the interest against your tax bill each year then sell when the price is right in the future, paying off the mortgage (and then some, hopefully)

You can only live in 1 house and I would concentrate on paying the mortgage off on that (assuming you own it?).

mlp

You offset the interest against your tax bill each year

You actually offset the interest against your gross profit and then pay tax on the remaining net profit.

Pincher

mlp wrote: »

You actually offset the interest against your gross profit and then pay tax on the remaining net profit.

It's more bizarre than that when you actually fill out the self-assessment form.


For example, the 10% Wear and Tear Allowance is 10% of the Rental Income, not the gross profit.


The first time I did it, and sat down with the accountant, about 15 years ago, I thought I already organised it correctly, but he took it apart to fit in with how the tax man wants it.


Wait till you have to split it all for two tax payers, :eek: :eek: :eek: