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do i pay off a buy to let?
roxytoo
Posts: 47 Forumite
I have been paying off lump sums on our buy to let. I now have the opportunity to pay off the whole amount. I need the rental income. But is this wise, I can't work out how much more tax I will be paying as I can't offset that now?
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Comments
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What rate of interest are you paying on your BTL mortgage and are you a higher rate taxpayer? Does your BTL make a profit (ie rent exceeds interest, agents fees, R&M fees, other fees/espenses)?0
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The rate is 2.5%. No am not a higher rate tax payer, yes it makes a profit0
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Do you have a residential mortgage, if so at what rate?I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0
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The tax shield impact (ie offsetting BTL interest vs BTL Profits) makes your effective rate of interest 2% ((100%-20%)*2.5%) as you are a basic rate taxpayer (assuming your income exceeds your Personal Allowance).
As KS has indicated, if you pay a higher rate than 2% on your residential mortgage (if one exists) then it would make sense to use your money to overpay on this mortgage rather than the BTL.
If you have no resi mortgage then if other investments (ISA, savings etc) can make you more than 2% it would probably make sense to invest rather than paydown BTL.
You should consider your attitude to risk. For example, I am rather risk averse, so I would probably pay off the BTL even should I (in theory) be able to generate higher investment returns than the 2% by use of ISA or stocks/shares.0 -
Hi thanks all, I have no resi mortgage, and can't seem to make more than 2% on investments (except isas and I don't think theres much difference in the rates now?) so may look to pay it off! Thanks to everyone who replied0
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