Purchase BTL or pay off chunk of current mortgage?

tizzle6560

Hi all,

Let me start by saying that this is very early doors thinking and am simply weighing up options on the above, so any advice would be great.

I have a mortgaged flat in SW London bought for £350k nearly 4 years ago - After works done ourselves it is now valued at approx £500-550k. £300k left to pay on it.

I have approx £50k savings that I could either put towards paying off my mortgage loan amount, or by going in with a family member who can match that amount, have the option to put it towards a BTL property

Am aware of 2nd home stamp duty levy (although have the option to put my property in my partners name thus avoiding that?) and potentially higher deposit required, but the monthly rental income is appealing, plus the capital gains on the property itself (providing/hoping it increases).

Just curious to know what you would do if in similar position, or even something else like increase pension payments.

TIA

Crashy_Time

http://www.telegraph.co.uk/property/buy/buy-to-let-calculator-how-will-new-tax-reduce-your-profit/

p00hsticks

What sort of income do you have and how secure is it ?

A £300k mortgage would scare the pants off me but it's all relative.

Do you have a six month emergency fund to cover mortgage and living expenses if you lost your job / became ill etc..... ?

What pension arrangements do you have in place ?

p00hsticks

tizzle6560 wrote: »

Am aware of 2nd home stamp duty levy (although have the option to put my property in my partners name thus avoiding that?)

This is not just a technicality - it means you are giving your partner your property. Do you really trust them that much, just in order to save a few grand SDLT ? Don't do it.

tizzle6560

p00hsticks wrote: »

What sort of income do you have and how secure is it ?

A £300k mortgage would scare the pants off me but it's all relative.

Do you have a six month emergency fund to cover mortgage and living expenses if you lost your job / became ill etc..... ?

What pension arrangements do you have in place ?

As you said - all relative.

Income varies slightly but anywhere between £60-100k NET.

Pension arrangement through work is 10% matched and I salary sacrifice 5% on top

theartfullodger

Live a little: Buy a sports car, boat, 'plane, get a mistress/toy-boy/both, more holidays, entertaining..

I can promise you, BTL ain't always fun!

Crashy_Time

https://www.lettingagenttoday.co.uk/breaking-news/2017/5/small-scale-btl-investors-waking-up-to-tax-change-says-trade-group

tizzle6560

so am I right in assuming the general consensus here reckons paying off existing mortgage is in my best interests?

LandyAndy

tizzle6560 wrote: »

so am I right in assuming the general consensus here reckons paying off existing mortgage is in my best interests?

It's a no-brainer, particularly as you intend to buy the BTL in partnership with a family member. That is a really bad idea.

tizzle6560

LandyAndy wrote: »

It's a no-brainer, particularly as you intend to buy the BTL in partnership with a family member. That is a really bad idea.

Depends on your family though, no? But point taken.

martinsurrey

tizzle6560 wrote: »

so am I right in assuming the general consensus here reckons paying off existing mortgage is in my best interests?

If the last person had listened to Crashy it would have potentially cost them £60k in a week...

Crashys great advice

You can currently get around the new tax rules by buying through a corporate wrapper (and since you don't own the property yet) its not a real problem, and the corporate structure lends its self to multiple buyers.

However, you would be hugely exposed to the property market, and while I don't agree with Crashy, I don't think putting all your investment eggs in one basket is a good idea, so I would avoid BTL if I was you, putting excess cash into S&S ISA's in a few tracker funds would be my way forward.