Bettere to pay mortgage or save for deposit for second home

viraam

Hi All,
I am new to this forum. Post on this forum are really helpful. I need to ask one question

Currently I am living in flat and has fixed term mortgage till 2021. LTV on current flat is less than 60 %. I am planning to buy the new bigger house and putting this house on buy to let mortgage. My question is what is better:
Shall I payoff the mortgage of first flat and bring it down further than 60% or shall I build up my higher deposit for next property ( more than 90 % LTV) .





I already aware of buy to let terms and my financial condition are good (keeping rainy day in mind).

foxy-stoat

I would say save for the next mortgage and get your LTV down from 90%.

brexit

Overpay your current mortgage as much as you can without triggering ERC, most mortgage allow 10% a year.
When you are ready for the new bigger house, remortgage the existing residential mortgage to a buy to let 75% LTV product. That way you will have your bigger deposit for next home and in the mean time the overpayment will save some interest.

muhandis

I think the question you need to ask is what your saved funds are earning/costing you at the moment.

- If your funds are sitting somewhere safe where they earn similar (or more) interest rate to what you pay on your mortgage, then keep saving there.

- If your funds are idle and not earning you anything then consider overpaying your mortgage (if you're sure you won't need access to the funds).

In any case, when you remortgage your current flat from a residential to a BTL mortgage, you can release any extra funds you need to put down on your next home.

viraam wrote: »

Hi All,
I am new to this forum. Post on this forum are really helpful. I need to ask one question

Currently I am living in flat and has fixed term mortgage till 2021. LTV on current flat is less than 60 %. I am planning to buy the new bigger house and putting this house on buy to let mortgage. My question is what is better:
Shall I payoff the mortgage of first flat and bring it down further than 60% or shall I build up my higher deposit for next property ( more than 90 % LTV) .





I already aware of buy to let terms and my financial condition are good (keeping rainy day in mind).