Purchase BTL or pay off chunk of current mortgage?

LandyAndy

tizzle6560 wrote: »

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

Not really unless you have no feelings at all for any of your family.


If you do it makes taking business decisions well nigh impossible if they impact on the family.

Crashy_Time

martinsurrey wrote: »

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.

Oh, was I way out with my guesstimate? How much did it sell for, do you have a link?

Crashy_Time

tizzle6560 wrote: »

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

IMO, yes, and quickly, London bubble has to pop soon. I wouldn`t throw savings into it though, cut your outgoings and make over-payments.

Cakeguts

Pay off the mortgage. !00k would be a very cheap buy to let property. Cheap properties attract cheap tenants. They may try to live as cheaply as possible by not paying the rent.

DumbMuscle

What's the interest rate on the mortgage (which tells you how much the 50K is earning you by paying off the mortgage, e.g. 2% is getting you over £1000 a year - "over" because of compound interest effects)? Would you hit any early repayment charges by paying off £50k? (if you're on a fixed/tracker deal, these often kick in if you try and pay off more than 10% per year)

Do you have other, higher interest debts you could repay (e.g. car payments)?

The mortgage is probably the right option (paying off just enough to avoid any early repayment, then saving the rest until next year), but you might as well put some actual numbers to it.

jimbog

Crashy_Time wrote: »

Oh, was I way out with my guesstimate?

Yes, by 33%
#awkward

Marine_life

tizzle6560 wrote: »

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

I would not look at it so black and white. I think the main problem with straight BTL is putting all your eggs in one basket. If you want exposure to property you could look at one of the crowdfunding alternatives like propertypartner and spread your money over a few properties. Ok, they will take a fee but you have zero hassle.

saajan_12

I don't always say pay off rather than buy, but in this case

1. Joint BTL with a family member is asking for trouble.. even if you get on fine, what if someone needs to liquidise their half? Forced sales are long+expensive.. how do you decide on repairs/renovations?

2. Rent 'profit' if you BTL is somewhat balanced by reduction in mortgage payments on your main mortgage.. you'd have to run numbers to see which actually wins

3. If you get a BTL mortgage (max LTV 75%) with a £90k deposit (assuming 10k for tax/costs), that gives you £360-400k for a BTL.. this will be hard to find a decent property given
-> ideally near your SW London home so you can attend to repairs, inspections..
-> if that only buys a leasehold flat, this can carry potential restrictions and onerous service charges / ground rents

tizzle6560

Cakeguts wrote: »

Pay off the mortgage. !00k would be a very cheap buy to let property. Cheap properties attract cheap tenants. They may try to live as cheaply as possible by not paying the rent.

£100k would be to cover stamp duty, 25% deposit, legal fees and furnish it etc. Property likely to be about £250k

Cakeguts

tizzle6560 wrote: »

£100k would be to cover stamp duty, 25% deposit, legal fees and furnish it etc. Property likely to be about £250k

Why are you talking about furnishing it? Are you thinking of letting to students?