Starring property portfolio and clearing own mortgage.
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Whereto
Posts: 5 Forumite
I'm trying to work out the best route forward for the next step of my plans. The goal is to pay off my house and have a portfolio of houses rented out.
I've worked out soon that I will be debt free aside from my mortgage which is currently at a £400,000 balance.
The repayment is £2,300 per month on rate of circe 5.5%.
I have two options shortly which I am trying to decide between. Any advice would be greatly appreciated.
A. Pay off current mortgage in 7 years using surplus income of £4,000 per month.
B. Save the £4,000 per month and every 6 months after saving £24k for the next 3 years, buy a £90k - £100k property to rent out for circa £950 per month (based on the rental extensive market research in the specific area planned). Start using the 400 profit per month towards my own mortgage, using the £4,000 surplus, (potentially £8,000 per month after the 3 years) to clear whatever is left of my own mortgage.
Do I pay mine first or start doing the properties first?
I know there is a rule that savings to clear your mortgage are sometimes better in a savings account on that interest as opposed to paying it into the mortgage direct.
Just looking for a bit of input from others who have been potentially in the same position?
Thanks in advance.
I've worked out soon that I will be debt free aside from my mortgage which is currently at a £400,000 balance.
The repayment is £2,300 per month on rate of circe 5.5%.
I have two options shortly which I am trying to decide between. Any advice would be greatly appreciated.
A. Pay off current mortgage in 7 years using surplus income of £4,000 per month.
B. Save the £4,000 per month and every 6 months after saving £24k for the next 3 years, buy a £90k - £100k property to rent out for circa £950 per month (based on the rental extensive market research in the specific area planned). Start using the 400 profit per month towards my own mortgage, using the £4,000 surplus, (potentially £8,000 per month after the 3 years) to clear whatever is left of my own mortgage.
Do I pay mine first or start doing the properties first?
I know there is a rule that savings to clear your mortgage are sometimes better in a savings account on that interest as opposed to paying it into the mortgage direct.
Just looking for a bit of input from others who have been potentially in the same position?
Thanks in advance.
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Comments
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If your goal is to run an investment portfolio, I would suggest you get a better understanding of leverage. Paying off debt any faster than required is money that could be generating a return.
Neither of your options match that objective.0 -
Personally never had the luxury of £4,000 per month of disposable income. Unlikely you will find many people that do on this site.0
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So you plan on taking out a new £80k mortgage every 6 months? And your income will support that as well as your current mortgage? And all your other expenses?? Even assuming you don't manage to rent anything? And there's no other costs in renting??
Or have I misunderstood something?"Never retract, never explain, never apologise; get things done and let them howl.”0 -
BarelySentientAI said:If your goal is to run an investment portfolio, I would suggest you get a better understanding of leverage. Paying off debt any faster than required is money that could be generating a return.
Neither of your options match that objective.
That is why I have come on this site to try and look at options and seek any advice of where to start to make the best move next.
I don't invest in anything at present so do not have the knowledge or expertise. I do follow the market in the area of interest for investing in properties and have done so for the past 15 years. I am hoping to use this knowledge to make the best move in terms of properties to purchase.
Equally, debt is indeed debt so I'd like to be in the position where at least my own home is paid off and any outstanding debt is not something that is a requirement as such. Rentals can be sold if required whereas my own home I'd like to own outright.
Ideally the other properties are a nest for my children and towards retirement down the line. I'm 36 and have currently not started a pension. Just trying to get everything in line now that I am in a position to do so.0 -
Brie said:So you plan on taking out a new £80k mortgage every 6 months? And your income will support that as well as your current mortgage? And all your other expenses?? Even assuming you don't manage to rent anything? And there's no other costs in renting??
Or have I misunderstood something?0 -
Personally pay off own mortgage & see where property market is in 7 years.
Life in the slow lane1 -
If you want to do a property rental business then it's better to have money tied up in a residential mortgage as it's cheaper than BTL. BTLs are self supporting so you don't need to earn enough to cover all the mortgages as you likely know.
If you get a few properties you might then get some advice on whether getting a company to own them is the best route, rather than them being in your name.
I don't think your plan is crazy if those numbers are correct. Paying off the mortgage is the safe option, but not always the best one.0 -
Not as easy as it seems.
Constant change in regulations, increased costs including tax.
The Youtube vidoes make it seems easier.
Buying in a Limited company if higher rate tax payer is a good choice.
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