Interest only or repayment on BTL?

FlorayG

I invested my inheritance on two BTL properties, 30% deposit, interest only mortgage, with the purpose of getting an income from them and eventually in some years time selling them hopefully at a profit. I'm not worried about leaving anything to anybody when I die and I'm currently 66 and in full time employment. So far, tenants are great, I'm getting a small profit ( was a LOT larger until I recently remortgaged!), all going well.
Now i have some extra income ( clue - I'm 66 this year) which I don't NEED while I'm working and I'm wondering if there's any advantage to changing one or both mortgages to repayment and paying the extra each month? (The rents wouldn't cover this once all expenses were taken out of them) or should I just put that money in a high interest account? Which is going to benefit me the most?

DE_612183

I guess it depends on the area the properties are in - basically you looking at the difference between investing in a savings account - known interest rate and investing in equity - unknown rate.

You could always do a bit of both - regular savings account and then every 6 months take out a lump sum and pay against the mortgage if property prices have increased in that area. 

FlorayG

Property prices are pretty static here ATM. I bought just after the lockdown, prices still going up then but have dropped since. I had one valued before I remortgaged and currently it's worth pretty much exactly what I paid for it. Who knows what will happen in years to come?

Albermarle

As an alternative to a savings account. you could increase contributions to your workplace pension. 
Although it will depend on what sort of job/pension you have .

Bookworm105

Albermarle said:

As an alternative to a savings account. you could increase contributions to your workplace pension. 
Although it will depend on what sort of job/pension you have .

as OP is 66 years old and still in employment this is a good idea 

interest rates on savings accounts likely to fall in short / medium term

impending 13+ years of Labour governments will see CGT rates on landlords hiked for class war reasons, so equity may end up being taxed at rates above income tax on savings interest 

yes pensioners are not out of the spotlight for being "hit" somehow, but I very much doubt the 25% tax free element will be removed, so piling more into a pension plan is a not unreasonable gamble given your age 

FlorayG

I've only had a workplace pension for a few years - since it became compulsory - so it's not going to generate any appreciable income when it matured, probably no more than £500 a year on forecast, so I expect to take it as a lump sum. Is it still a good idea in that case? And how much extra should I contribute?

Albermarle

FlorayG said:

I've only had a workplace pension for a few years - since it became compulsory - so it's not going to generate any appreciable income when it matured, probably no more than £500 a year on forecast, so I expect to take it as a lump sum. Is it still a good idea in that case? And how much extra should I contribute?

The forecasts tend to be a bit pessimistic, but it is true that you need a large pot to generate a decent income. Minimum legal level of contributions is too low to generate a big pot even if you add them for 30 years. 
The advantage of pension contributions is tax relief. This is particularly generous if you are a higher rate taxpayer.
Many posters on here maximise pension contributions in the last few years of working, even using savings to top up and get that tax relief. So tens of thousands of Pounds a year, but of course most could not afford to do that, but every little helps.

FlorayG

Can someone explain for me please? I don't know owt about company pensions. I can 'spare' £400 a month at the moment so obviously want best investment for safe returns 

Albermarle

There is a pensions forum, where it might be better to post any questions later.

For now have a read of this.
Pensions: Everything you need to know for retirement - MSE (moneysavingexpert.com)
Or this
Pension basics | Help with pension basics | MoneyHelper

want best investment for safe returns 

Regardless of whether you invest in a pension, or property, or whatever, then with good rewards there is always an element of risk.

You can have safe cash savings, but in the long run you will normally get poorer returns. So that then is also a risk
Everything you do brings some level of risk, even doing nothing. There is a saying ' Taking no risks is the biggest risk of all'