Overpay Which Mortgage

CN35

Hi all,

I currently have 2 properties and 2 mortgages. Property one is my residence of which I owe £38500 on a property valued at £270000. This mortgage is with Nationwide at 1.84% and I pay £249 month. This is a standard repayment mortgage.

Property 2 is a buy to let investment mortgage of £98000 on property value of £165000. This is interest only mortgage with Virgin of 1.87% of £152 month.

I usually have around £1000 spare a month to overpay which I have been doing on the Nationwide mortgage. However now the Nationwide balance is reducing should I consider overpaying the Virgin mortgage?

Currently there are no penalties on the Nationwide mortgage. But Virgin has a max of 10% of outstanding balance

Hope this makes sense

CN35

dimbo61

You have not stated how long the current deals have left?
Are you a higher rate tax payer ?

Thrugelmir

What's the impact on your tax position if you overpay the BTL mortgage?

CN35

Thanks for the responses. Technically I have 20 years left on both but given spare income I would like to clear both in 10 years.

Ps my income including rental is fractionally under the 40%. I split the rental income with my wife who is a 20% tax payer.

How does this affect my tax if I overpay the Virgin mortgage?

Thrugelmir

By reducing the amount owed less interest is charged. The interest is offsetable against income thereby reducing the tax liability.

Your residential mortgage doesn't benefit from the same advantage.

Hence why BTL mortgages tend to be interest only. With the real gain coming from capital appreciation of the property. Rather than an increasing net rental income stream.

penners324

Wouldn't it be preferable to add some of that excess cash to your pension?