Save for buy to let deposit or pay off current mortgage??

Breeze11

We have an increased income for a few years due to a job opertunity my husband has taken. We'd like this extra money to be used as well as it can be rather than just buying stuff!

So, the way we see it, we can overpay our current mortgage (currently 126000 with 17 years left) to get us well on the way to paying it off early which is something we would love to do. We can pay up to 20% a year with no fees - we wouldn't pay that much.
Or
We can save this extra income for a year or two and get a deposit for a property which we can then rent out. This is also something we would like to do as an investment for the future. We would probably buy in pembrokeshire as my brother is a letting agent there.

I'd love to hear some opinions on these options. It would be lovely to do both but the finances don't quite reach that far!

Thank you

Guest101

Can you afford both mortgages after the income drops?


If not then this idea wont get off the ground really.

JimmyTheWig

If you like the idea of being a landlord then there is money to be made. It's a lot of work, but if you want to do it that's fine.
There's also a big risk. What would you do in a few years time once the increased income has stopped and you have a void period (i.e. no tenents) or need to do hefty repairs to the place?
If you already own a property with a mortgage then you're heavily exposed to the UK property market. Do you want to be more exposed to it (i.e. putting all your eggs in one basket)?

kinger101

BTL asside, you're looking at this the wrong way.

What is your mortgage rate?
What level of risk suits you?
If it's low, what interest rates are currently available?

As a typical example, Santander pay 3% on balances up to £30K. For basic rate taxpayers, the first £1,000 of interest is tax free.

Compared to a mortgage charging 2%, it makes more sense to stick the money into Santander, until perhaps it's time to remortgage when you work out the rates available at different LTV.

If you're willing to take some risk, stocks and shares are likely to give even better returns over the longer term. And if you're a higher rate taxpayer, and pension is much more sensible (or lifetime ISA for those under 40 from April 2017).

Overpaying you mortgage isn't always the best use of your cash.

Back to BTL - if you're a higher rate taxpayer, I wouldn't touch it with a bargepole if you require significant leverage.

Thrugelmir

Are your job prospects secure longer term ?

What are your pension provisions like?

Cakeguts

For a buy to let you have to be able to pay the mortgage if you have an empty property and you have to be able to pay for repairs as well as the mortgage so if money is going to be tight don't get a buy to let. It isn't fair on the tenant if you don't have enough money to be able to easily afford repairs when they come up.

Debtslayer

Personally if it were me I would be overpaying my current mortgage with the aim to be mortgage free as soon as possible. But I'm not a risk taker at all; so would choose the safer option