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Any Reason Not To Pay Off BTL Mortgage?
JKS$(
Posts: 130 Forumite
Posting for a friend who would like to hear views.
He owns his own home (no mortgage) that he lives in with his grown up daughter & her family. He tool ill health retirement after an accident & is very unlikely to work again, income made up of disability benefit & an occupational pension.
Before his accident he bought a flat as a BTL investment with a BTL repayment mortgage which he rents out. He's in the position of being able to pay that off in full now (around £28K as he put down a substantial cash deposit when he bought it) Mortgage rate is fixed at 2.5% until April this year, then will be higher (we assume, he's not asked his provider about that yet)
He doubts he'll get another mortgage again, give his income is mostly benefits, so he's wondering if he should keep the mortgage running as it would be easier to remortgage with the existing provider if he needs to, rather than get a new mortgage. He also has some savings to cover emergencies - flat related disasters would be tax deductible (to some extent & he has an accountant to advise him) Renting out the flat only makes a profit of £1-2K/year & while this would increase as mortgage related tax deductions would obviously stop, he's OK with paying slightly more tax.
He'll save at least £3K/year as he won't be paying the mortgage every month.
He's aware that there's an early repayment fee (£275) + mortgage exit fee (£125)
The flat is caught up in the cladding mess, but the developer has written to him to say they will cover any costs of potential work needed. It's in a small block in Wales, which has different rules from England, so it may not be mortgageable for some time, but he doesn't want to sell it anyway. He hopes he can live in it himself (with adaptations) or his daughter & her family can live in it. He thinks he could get a small mortgage on his current home if needed, although we couldn't come up with any reasons as to why he'd need to! It's worth around £200K.
What hasn't he considered & what advice would you give him?
Thanks in advance.
He owns his own home (no mortgage) that he lives in with his grown up daughter & her family. He tool ill health retirement after an accident & is very unlikely to work again, income made up of disability benefit & an occupational pension.
Before his accident he bought a flat as a BTL investment with a BTL repayment mortgage which he rents out. He's in the position of being able to pay that off in full now (around £28K as he put down a substantial cash deposit when he bought it) Mortgage rate is fixed at 2.5% until April this year, then will be higher (we assume, he's not asked his provider about that yet)
He doubts he'll get another mortgage again, give his income is mostly benefits, so he's wondering if he should keep the mortgage running as it would be easier to remortgage with the existing provider if he needs to, rather than get a new mortgage. He also has some savings to cover emergencies - flat related disasters would be tax deductible (to some extent & he has an accountant to advise him) Renting out the flat only makes a profit of £1-2K/year & while this would increase as mortgage related tax deductions would obviously stop, he's OK with paying slightly more tax.
He'll save at least £3K/year as he won't be paying the mortgage every month.
He's aware that there's an early repayment fee (£275) + mortgage exit fee (£125)
The flat is caught up in the cladding mess, but the developer has written to him to say they will cover any costs of potential work needed. It's in a small block in Wales, which has different rules from England, so it may not be mortgageable for some time, but he doesn't want to sell it anyway. He hopes he can live in it himself (with adaptations) or his daughter & her family can live in it. He thinks he could get a small mortgage on his current home if needed, although we couldn't come up with any reasons as to why he'd need to! It's worth around £200K.
What hasn't he considered & what advice would you give him?
Thanks in advance.
0
Comments
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He just needs to look at the return he gets from the money currently vs the return he would get if he paid off the mortgage with it.1
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