am I an idiot for using a £40k windfall to pay off my interest only BTL mortgage?

I have a fast-approaching dilemma.
I'm in the middle of an exceptionally good year at work (run my own biz) and I'm likely to have about £40k extra earnings by the end of the year.
I have £38K owing on a rental property which is on an interest only mortgage which ends Aug 2023. I'm the sole owner of this.
I have an emergency fund of savings.
My husband and I own about half of our house and are overpaying on your repayment residential mortgage.
We are both actively saving into Premium Bonds with a view to buying a buy to let flat together when the house market cools over the next five years. We have nowhere near enough saved to buy one outright although that's the ultimate aim.
My question is this: if I use £38k of my unexpected business earnings to clear the interest only mortgage on the buy to let place am I making a big mistake?
It seems to me to make good financial sense to clear a debt completely especially as saving money seems a waste of time given the way inflation is eating away at it and how poor interest rates are.
Am I missing anything - I'm keen to hear from IFAs and anyone with a good head for money to have their say on this.
All opinions welcome!


  • South_coast
    South_coast Posts: 4,793
    First Anniversary First Post Name Dropper Photogenic
    I'm sure someone will ask you what your pension provision is and point out the tax relief you would get for paying the money into a pension. However, I think I'm with you and would be extremely tempted to just wipe out a debt completely, especially when you've got to pay it off next year anyway (what is the plan for that if you don't use this money?). You'll then have the income from the rent to do whatever you want with. Just make sure you use the remaining £2k to do something fun please - you've worked really hard to earn that money, make sure you get more enjoyment from it than paying off debt!
    Mortgage start: £65,495 (March 2016)
    Cleared 🧚‍♀️🧚‍♀️🧚‍♀️!!! In 5 years, 1 month and 29 days
    Total amount repaid: £72,307.03. £1.10 repaid for every £1.00 borrowed

    Finally earning interest instead of paying it!!!
  • greenbee
    greenbee Posts: 16,054
    Name Dropper Photogenic First Anniversary First Post
    I'm with @South_coast - while you can get a good tax rebate from putting the money into your pension, paying of the mortgage would be a weight off my mind. Having said that, I used my last redundancy payment to top up my pension - and then the tax rebate went to my mortgage. However, it was on a different scale - while it would have made a decent dent in the mortgage, paying it off completely is a different matter. 
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