I need help on Rental V Mortgage Overpay calculations

edgex

jaffab wrote: »

4 years is an arbitrary duration as we are looking to retire and liquidate our business and other properties in the next 4-7 years.

No, this is the only Scottish property - the others are in England. We thought about moving them over to the Business, but that makes the maths worse as we would have the bizz buy it at fair value (so still CGT to pay) but then also company tax on disposal (in this case, via ER).

Sell it now then
Pay off any other debts
Any amount you can't overpay into your mortgage now, put into a cash savings account. (if the overpayment lump sum opportunity is more than a year away after selling, put it into a 1year fixed account)


Higher rate taxpayers
Is this under your control, or is that due to salaries?

jaffab

edgex wrote: »

Sell it now then
Pay off any other debts
Any amount you can't overpay into your mortgage now, put into a cash savings account. (if the overpayment lump sum opportunity is more than a year away after selling, put it into a 1year fixed account)

Was what we were thinking - hence doing the maths. No other debts. And if we did go this way, something like a 1 year bond until we could throw it at the mortgage. IF... the numbers work better for this that BTL.

edgex wrote: »

Higher rate taxpayers
Is this under your control, or is that due to salaries?

Salary driven.

edgex

jaffab wrote: »

Was what we were thinking - hence doing the maths. No other debts. And if we did go this way, something like a 1 year bond until we could throw it at the mortgage. IF... the numbers work better for this that BTL.

Salary driven.

The ~£85k from selling is somewhat a known
The rental figures make a lot of assumptions
At the present time (& with you getting out of rental anyway) it's better to go with the known

Salary from an employer, not your company?
(any debt in the ltd company?)

jaffab

My wifes salary is from her employer.
My salary (usual mix of PAYE and div's) from my company - property in her name so her tax. And I dont want to do anything dodgy with my salary to evade tax (if you know what I mean).
No debt in company.

atush

jaffab wrote: »

Yes - getting off topic. Was all covered and above board - we gave him the money, he purchased it, then after the clauses had expired, it was transferred. All signed off, legally checked, done, dusted, off topic.

Have her transfer 50% of the house to you, then 2x CGT allowances

edgex

jaffab wrote: »

My wifes salary is from her employer.
My salary (usual mix of PAYE and div's) from my company - property in her name so her tax. And I dont want to do anything dodgy with my salary to evade tax (if you know what I mean).
No debt in company.

So it's an easy one;

sell the property, take the CGT hit (though it's ~£70k free profit)
once you have the cash, do whatever overpayment/s you can on the current mortgage (don't wait for the deal to end next year)
as you approach the end of the deal, see if you could re-mortgage at a better rate (as suggested by MaxiRobriguez) for say 10 years
make your regular overpayments on the new mortgage *


Some very basic maths;
£85k cash from sale
- £14k overpayment onto mortgage now
leaves £70k cash + £126k mortgage
if you can re-mortgage, it's then only for ~£56k



* you've indicated that you could make £1k pm overpayments. If a new smaller mortgage would only allow say half that, don't spend the £500 pm, put it into a regular saver.

edgex

atush wrote: »

Have her transfer 50% of the house to you, then 2x CGT allowances

Good point
Obviously the transfer needs to be done prior to any attempt to sell


jaffab;
when you say "se we gave him the money and the house was transferred over to my Wife"
You'd have to check whether you already have an interest in the property.

juststuff123

Can you actually pay £86k off your mortgage in one go? Most mortgages are limited to over-payments of 10% of outstanding a year.
A: Correct - we cant.. This year. But next year when our existing mortgage deal ends we can. Whether we could then pay the £1000 a month extra is a good point - most likely this would then break the 10% over payment.

When you current deal ends, throw your £86k into the mortgage. When you complete your re-mortgage you could reduce the term so you can increase your contractual payments by the £1000 over-payments you want to make. That way you wouldn't break the 10% over-payment barrier. Be careful though, this option reduces your flexibility you would have to make the larger payments every month so you need to make sure you don't need the money for emergencies etc.