Sell BTL to put in a pension

chris316

Apologies if this is on the wrong page.
Any thoughts on what to do with my situation. I currently have 2 BTL properties ( I owe roughly 55k combined) that an investor has offered 170k for. I owe 95k on my residential mortgage. Would I be best to pay off my residential mortgage and then pay some money weekly into something or carry on paying my mortgage and put 100k somewhere (someone in work mentioned SIPPs) leaving me with a bit of cash to play with after fees, tax.
Or is it a good idea to keep the BTLs? They currently cost me about 1k a year after I've gave the tax man his share, this will probably go up in the near future as the rules are changing about writing off the interest apparently. (6.5 years left on both BTL mortgages.)
Other info, the houses are worth about £190k but I would not have to worry about estate agent fees, getting rid of tenants etc and would be done relatively quickly.
I also have a good company pension, I'm 45 most people escape our place at 58.
Ive been to an IFA that recommended selling them and investing the money but got the feeling that was what was going to make her the most money ha.
I do like the sound of being mortgage free but know it may not be the best way to go.
Thanks in advance

dunstonh

Would I be best to pay off my residential mortgage and then pay some money weekly into something or carry on paying my mortgage and put 100k somewhere (someone in work mentioned SIPPs) leaving me with a bit of cash to play with after fees, tax.

Depends on your circumstances and objectives (both current and future)

Or is it a good idea to keep the BTLs? They currently cost me about 1k a year after I've gave the tax man his share, this will probably go up in the near future as the rules are changing about writing off the interest apparently. (6.5 years left on both BTL mortgages.)

What is the rental yield?

I also have a good company pension,

Half the time I hear that, it usually turns out the person doesn't. Or rather context is needed. i.e. good scheme but not paying enough into it.

Ive been to an IFA that recommended selling them and investing the money but got the feeling that was what was going to make her the most money ha.

If you are going to pay for advice then the advice is going to be without bias. If you just have the free first meeting then there will not be any advice. There is never enough time to get the required info and provide advice in the 30-60 mins allocated. As you already have property, discussion about alternatives would be logical.

I do like the sound of being mortgage free but know it may not be the best way to go.

With todays interest rates, overpaying/clearing the mortgage is often not the best option.

You havent mentioned capital gains tax in your post. How much are you going to lose on that when you sell?

SmashedAvacado

If you have made a gain on both houses then selling them together for less than they are worth isnt the best thing to do - because you wont get the benefit of say selling them over two years and using a CGT allowance from each year.

Also selling quickly at 20k less than they are worth if you are not in a hurry sounds like madness. If they are washing their faces, then the best time to sell property is in a strong rising market, not a weak one. Also, it will be more expensive to buy more property from now on in, with the levels of SDLT payable - so unless you need to sell, if they are washing their face i would keep.

It does massively depend on the particular numbers involved though.,

Terron

Since your BTLs are costing you £1k a year then selling seems a good idea, but selling both in the same year is probably not the best way to do it.
Once the uncertainty of Brexi is out of the way (no matter the result) then people will be more likely to commit to buying new homes so prices may rise, so I would be tempted to wait a bit.

chris316

What is the rental yield?
6.6% on one 6% on the other


Half the time I hear that, it usually turns out the person doesn't.
The pension is definitely enough for me, my dad's been on the same one for 20 years living very comfortably and people have left in the past few months with very good terms.

chris316

I lived in both BTLs for long periods, from what IFA said there would be little or no CGT to pay.

bluenose1

Are you a basic or higher rate tax payer.? If a basic rate tax payer there is no real change to the amount of tax landlords will pay in future.
Does your rental income not cover your outgoings, if not I assume it is because you have repayment mortgages? So although they may be costing you a £1,000 per year you will be paying off the capital, possibly more than the £1,000 they cost you.
Could you pay extra contributions into your works pension and do they offer salary sacrifice?
We have three properties and no intention of selling them as making a decent return on them, though we have interest only mortgages. Our aim is to have them supplement our income until SP commences.
I also pay the maximum additional contribution allowed into my works pension scheme.

chris316

Higher rate tax payer, the rental covers the mortgages easily but not what I have to put aside for the tax man.

Dazed_and_confused

If a basic rate tax payer there is no real change

That's just not true. The changes to the loan interest rules could easily move a basic rate into being a higher rate payer.

And some elderly basic rate payers with BTL property and a mortgage could also lose some of their Married Couple's Allowance as their rental profits increase due to the new rules.

It is massive oversimplification to say it doesn't affect basic rate payers.

bluenose1

Dazed_and_confused wrote: »

That's just not true. The changes to the loan interest rules could easily move a basic rate into being a higher rate payer.

And some elderly basic rate payers with BTL property and a mortgage could also lose some of their Married Couple's Allowance as their rental profits increase due to the new rules.

It is massive oversimplification to say it doesn't affect basic rate payers.

Yes, I agree I should have said if you continue to be a basic rate tax payer after taking into account the changes your tax bill does not change. Didn't realise it also may affect some getting Married couples allowance.

My oh is retired and on a pension and I am contributing the maximum to my works pension and we have both continued to both be basic rate tax payers. I thought initially our tax bill would increase but it hasn't.

There are some useful case studies on the HMRC website
https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

Dazed_and_confused

To be fair one of the couple does have to be 80+ to get Married Couple's Allowance but sure there will be a few elderly married landlords with a BTL mortgage somewhere!