Mortgage Free Dilemma

IveSeenTheLight

Hi Everyone,
First posting here, think I should explain a little about my situation before I explain my dilemma.

At the beginning of this year, I had saved up a little money and was considering placing it all into my mortgage.
I realised though that I could make the money work harder for me, so I re-mortgaged my home to release some capital.
With the released equity and my savings I now had enough to put down a maximum benefit deposit on a buy to let property.
So in short, while I had some money to reduce my mortgage, I have in fact doubled my effective mortgage by now having two properties.

I made sure the property I bought to let, was in a good location, good size and easily rentable (important to do your homework) then put about making overpayment on both of these properties.

I have now made the maximum overpayments possible in both properties for this year.

A recent valuation of my buy to let property has shown a significant increase in property value, meaning that if sold the buty to let propertie, along with the overpayments I have made, I would reduce my home property by approx 70% of my mortgage from the start of this year.

If the same property valuation increase and overpayments are maintained, the forecasted property valuation of my buy to let property would be higher than my home mortgage by half way through next year.

My dilemma is this: -

1) Do I cash in on my buy to let property as soon as the valuation and equity is above paying off both mortgages? Expected approx June 2008?
2) Do I keep on the buy to let mortgage beyond this period using the property valuation increase and overpayments as a higher return savings / account?
3) Do I release more equity to purchase another buy to let property in order to capatilise on more property price increases? I realise there is a risk involved, however there is an element of risk for any money making venture.

I should note that I am tied into both properties for a further 2 years.
Due to the tie-in, I am swaing between options 2 & 3.
Option 2 is the safe option which ensures I am mortgage free at the end of the tie-in period, while option 3 is speculating for a higher return.
Option 1 is still available, however I will need to evaluate the charges for clearing my mortgage within the tie-in period.

I'm looking forward to your comments and of course being mortgage free.

Kaz2904

I personally wouldn't want to be borrowing money for another btl at the current time. As you are tied in to your btl and present mortgage I would continue to pay off your mortgages but put the overpayments to your own property first. When you have filled your allowed overpayment you should investigate the interest rates achievable on savings compared to those on your btl mortgage. Then invest in the one which pays a higher rate.
If you are able then you should max out your ISA too.

IveSeenTheLight

Kaz2904 wrote: »

I personally wouldn't want to be borrowing money for another btl at the current time. As you are tied in to your btl and present mortgage I would continue to pay off your mortgages but put the overpayments to your own property first. When you have filled your allowed overpayment you should investigate the interest rates achievable on savings compared to those on your btl mortgage. Then invest in the one which pays a higher rate.
If you are able then you should max out your ISA too.

Thanks Kaz,
This is a safer process, however it is because I am tied in for a further two years and have already paid the maximum overpayments I can, that I am considering what I should do with any extra funds to maximise my money return.

As the property market is stilll booming and I would expect to for a number of years more (until supply outways demand) the return on the property price increases is substantially more than that from ISA's or high interest accounts.

I guess its coming down to how much of a risk am I willing to take to maximise my return, become mortgage free and save a little retirement money