Mortgage overpayment or second property as BTL

msy

Hello everyone, need advice from excellent people here on mse.

Age 40, family with 2 kids. Just bought our first property (3 bed terraced house), mortgage £170000, Interest 2.29%, LTV 57%, 2 years fixed, 10% overpayment allowed yearly.

Mortgage payment monthly £748 (24 years 10 months term)

I can afford to overpay one off + monthly the full allowable overpayment that is £17000 for this year. And hopefully will be able to overpay 2nd year as well if everything goes well.

Can't decide now to overpay the mortgage or save up as much as possible to buy a second property in 2 years for buy to let. I know the tax & responsibility to be a landlord. Also I know I will need at least 25% deposit for BTL that can be saved in 2 years.

What will be a better decision you think? Thanks a lot.

diamondsonly

Hi Msy,
Congrats on the new home. Must be a great feeling. We are 5 years into our 25 year Mortgage and have 147,800 left to pay. In our first year we started to OP and then decided to save money for BTL. Since then we have had our 2 small people and now have money allocated for BTL deposit. We are going remortgage our home to a lower rate (hopefully) and then thinking about early next year look for a BTL. So same as you wondering if we should use the funds to get MF or take out a BTL.

getmore4less

If you can make the letting business yield more than the mortgage(with the effort factor) then letting is probably the way to go.

Long term business that makes money so house value is secondary.

If going into the letting business an offset for cash flow and building up a portfolio may be worth a look.

lulabelle1

Hi - we had the same sort of dilemmas... We OP'd for around 5 years and ended up with enough OP's to fund 2 X B2L's...

We took back all of the OP's earlier this year and completed on our first B2L around March time. The second deposit is sitting in ISA's until we find a house and feel ready to do it again.

It was a wrench seeing the o/s mortgage balance go back up but I know that in the long term it makes financial sense.

The way I see it, is there's not many investments where someone is funding 70% and you only fund 30% (from the deposit).

In an ideal world with all things remaining equal, we'd like to buy around 4/5 B2L's in total, but who knows what's round the corner.

Best of luck with your decision