Worth overpaying some more or banking it?

curtis122

I have a BTL that I'm looking remortgage at some point over the next 9 months. Going to remortgage to get 100k out and no more than that.

Few general details - 
Bought for £110000
Value £210000
Mortgage 45k (rate 2.25%)

I had a fixed term saver mature and I was thinking about using it to pay the 10% allowed over payment or maybe just keep it in savings. I have enough savings to cover for a rainy day so don't need it to go into savings so thought it may be more beneficial to chip a bit more off the mortgage. 

Is there any benefit to this? Will it help given I'm looking to remortgage or not really make any difference at all whether it goes to pay the mortgage off or goes into my savings? The only benefit I could see is it could help protect me a bit more from the remortgage trap as some call it when it comes to eventually selling it and capital gains.

K_S

@curtis122 I don't know if it understood your question correctly but assuming I did -

If you are planning to do a capital-raise remo on your BTL property which is currently at 2.25%, I don't see the benefit of overpaying right now given that you are looking to release cash soon and you can get 3.8%+ on a easy access savings account.

Not sure what you're referring to by 'remo trap' or how any of the above would impact your CGT bill one way or the other.

curtis122 said:

I have a BTL that I'm looking remortgage at some point over the next 9 months. Going to remortgage to get 100k out and no more than that.

Few general details - 
Bought for £110000
Value £210000
Mortgage 45k (rate 2.25%)

I had a fixed term saver mature and I was thinking about using it to pay the 10% allowed over payment or maybe just keep it in savings. I have enough savings to cover for a rainy day so don't need it to go into savings so thought it may be more beneficial to chip a bit more off the mortgage. 

Is there any benefit to this? Will it help given I'm looking to remortgage or not really make any difference at all whether it goes to pay the mortgage off or goes into my savings? The only benefit I could see is it could help protect me a bit more from the remortgage trap as some call it when it comes to eventually selling it and capital gains.

curtis122

My current mortgage on it is at 2.25% don't know what my remortgage will be. I expect the rate will be over 4.5% unless it comes down down in the next 6 months or so.

The remortgage trap with CGT is when you remortgage your home then when it comes to disposing of it because of what you've borrowed and your mortgage to pay off and the difference in price between what you bought it and sold it, your CGT may be more than you get from your house sale. So you could have a CGT bill at the end to pay.

housebuyer143

Definitely don't see any reason to pay any off to just take it back out in 9 months. How much rent are you getting a month because a loan of £145k means you are going to need rent at probably £1000 a month on the new rates (if you are a basic rate tax payer).

If you are not getting that then what you can borrow is likely to be determined by how much rent you are generating.

TheAble

Why does CGT depend on mortgage? If you buy for X and sell for Y then surely CGT is calculated on (Y-X), irrespective of outstanding mortgage?

K_S

TheAble said:

Why does CGT depend on mortgage? If you buy for X and sell for Y then surely CGT is calculated on (Y-X), irrespective of outstanding mortgage?

@theable As I understood it, the OP is referring to the cash flow aspect of the CGT bill rather than the amount due.

To take an extreme illustration if the property was owned using a 100% LTV mortgage, on sale 100% of the proceeds would go towards paying off the mortgage leaving the seller having to find the cash needed to pay the CGT bill.