BtL - smarter to pay down mortgage or use allowance?

Nsar

Hi,
I have a BtL on interest only mortgage.
As a higher rate taxpayer, is it more efficient to pay down the mortgage each month or use the allowance (while it lasts).

Currently paying £550 a month in interest and after all costs (inc mortgage) I'm getting roughly £1400 in rent.

Thanks and apologies if this has been asked before.

booksurr

ask your accountant for a projection as without knowing the full real numbers applicable to your circumstance any answer could be meaningless

Nsar

Thanks but what other info is needed to answer the question?

anselld

Nsar wrote: »

Thanks but what other info is needed to answer the question?

The main question is what else would you do with the money if you don't pay down the mortgage?

Mortgage interest is a cost to the business so it is always good to reduce cost regardless of the tax position. However if you can use the money for some other investment which returns more than your mortgage interest (net of tax) then it is better to do that instead.

booksurr

Nsar wrote: »

Thanks but what other info is needed to answer the question?

1. mortgage interest rate
2. exact profit figure before interest £550 deduction
3. confirmation of when the lender recalculates the interest charge on the o/s balance? (daily, weekly, monthly, annually)
4. any fees charged for lump sum prepayments?
5. what would you do with the money if you did not pay down the mortgage balance - what interest rate? what investment risk to get that rate?

since tax is not 100%, a comparison must take account of all aspects of the equation:
lower interest but pay more tax v return from keep interest but pay less tax v return from alternative use of money not spent paying down the balance

Nsar

Thanks
1. Int. rate 2.34%
2. Varies a bit from month, depending on incidentals, but £2k is a reasonable average before mortgage
3. Mortgage paid 1st of each month
4. No fees applicable (would be if more than 10% of capital in a year but that doesn't apply)
5. Cash

Your last sentence describes what I'm asking about (apart from last bit which doesn't apply)
Thanks

Nsar

>>2. Varies a bit from month, depending on incidentals, but £2k is a reasonable average before mortgage<<
On reflection, make that £1750 a month.