Interest only mortgage BTL

Saint84

hi all
about to start a BTL mortgage. I want to also make some overpayments to this so the LTV ratio is higher when its next up for renewal in 5 years time.
If i start making monthly overpayments now, will the interest payments go down i assume each month (assuming 25 year term stays the same?)
thanks - any advice and insight appreciated. 

Thrugelmir

Interest charged will fall. However your taxable profit may possibly increase. 

Saint84

two questions:
1. when i overpay, do i have to nominate to reduce the payments (vs reduce term)
2. why would taxable profit may increase? i thought mortgage payments cannot offset?

Thrugelmir

Interest charged, subject to taxation rules, is a deductible expense.  

With regards to your other question. Depends on the lender and the amount of the overpayments made as to their approach. 

Saint84

Thrugelmir said:

Interest charged, subject to taxation rules, is a deductible expense.  

With regards to your other question. Depends on the lender and the amount of the overpayments made as to their approach. 

the deductible expense allowance ended in April 2020?

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782

Thrugelmir

Read on

"Instead, you'll receive a tax-credit, based on 20% of your mortgage interest payments."

Consult an accountant initially to gain an understanding of all the rules and allowances. 

dimbo61

Check very carefully the BTL mortgage you are signing up too.
We have one with Santander which allowed 10 % overpayment each year.
We also had a BTL mortgage with another lender which did not allow any overpayments during the whole fixed rate term without paying 5% ERC,s 
Don't let the Tax tail wag the dog !
The quicker you can pay off the BTL mortgage the more profit you can make.