Which debt to overpay?

Monkeychops16

Hi all, my circumstances have changed recently as I have moved in with my partner.

I have an interest only mortgage with 15 years left to run. I am renting it out for 12 months to see how it goes with consent to let. I am on the standard rate of 4.95%

He does not have a mortgage on the property we live in-his parents bought it with cash and he owes them it back. No time frame or interest added. He has only been paying £200 and now wants to pay more.

In all my money saving research I have read that we should pay off the debt with the higher interest-this case it's the mortgage on my property. But morally I think we should repay his parents?

Thoughts please?

Debtslayer

How much do you owe on your mortgage? Does the rent cover the mortgage? Will you be able to repay it when the interest only period ends?
What age are his parents?
How much does he owe them?

What amount of spare / available cash will you have to repay the debts? Maybe if would be more of a compromise and you would feel better if you split the money available between the two debts?

Monkeychops16

The rent covers the mortgage yes-
No I won't be able to repay it when my term runs out I suspect we will sell it before then
His parents are late 50's

Not sure about spare cash as yet thanks

But that's a thought-splitting it

AnotherJoe

Morally seems to me right thing to do is take the profit on the BTL (after tax etc) and use that to pay down partners parents loan. Otherwise you are making profit whilst not repaying them anything.

Financially, tax wise it probably is a poor ides to be paying down the BTL mortgage anyway as you lose the tax advantages. Best that money goes to parents rather than the taxman.

getmore4less

Does he own the place?
100% legal and beneficial ownership.

If you start paying down his debts with your money how do you protect that if there are issues in the future?

getmore4less

AnotherJoe wrote: »

Financially, tax wise it probably is a poor ides to be paying down the BTL mortgage anyway as you lose the tax advantages. Best that money goes to parents rather than the taxman.

The money does not go to the tax man it goes to the lender in interest.

if you pay off a bit you get some of that interest you no longer pay, the tax man gets a smaller bit.

Verix

Why don't you overpay on your mortgage and he pays more to his folks. I know you are benefiting from living in the property but if it all goes pear shaped you will need that property (and any equity therein).

Debtslayer

Monkeychops16 wrote: »

The rent covers the mortgage yes-
No I won't be able to repay it when my term runs out I suspect we will sell it before then
His parents are late 50's

Not sure about spare cash as yet thanks

But that's a thought-splitting it

Think you both need to sit down and work out a budget, so you know figures of spare cash you have and the amounts outstanding on your mortgage and to his parents.
Why does he only pay back £200 per month? Seems like a very small amount compared to how much he would have had to pay if he was renting somewhere.
If you help pay back his parents how will your money be protected should the two of you split up?

Thrugelmir

Monkeychops16 wrote: »

The rent covers the mortgage yes-

Is it profitable though after all costs and tax are taken into account?

Monkeychops16

No not yet this is only the 2nd month so.... We are only looking to rent mine short time at the moment= as others have said in case things go wrong living together (I have 2 children so the 3 of us have moved in to his house).