Should we sell our Buy to Let to pay off the mortgage on our home before interest rates rise?

Schwarzwald

N1_EP said:

... 
Outstanding mortgage on the flat is 68k
...current value is likely 480k.
....Our mortgage payments will jump from £2.4k per month (@ 1.5%)  to £3.6k (if interest is about 4.5% in Oct 25 when we must renew). 
We will really struggle to pay this. 
... Should we sell the flat and hugely reduce our mortgage so we can focus on savings (we currently have none)....

Yes sell the flat, it will take time.
Assuming you get out 400k gross of the sale, deduct some taxes, etc. so net maybe say 350-380k?

Crucial difference to what you say .... DO NOT use this ALL all to repay your mortgage.

I'd rather only repay 200k and keep the 150k for peace of mind. if you keep the 150k you will not need to worry about making your monthly mortgage payments for quite a while.

The last thing you want is to reduce your mortgage on paper, but then for whatever reason, ilness etc, not able to make the monthly payments for some time. the bank will not care you reduced the total amount massively, all they see is you are struggling to make the monthly payments.

N1_EP

Wow, thank you ian1246 I really appreciate you taking so much time to give me such a detailed response. This forum is amazing.   

Can I follow this on with an additional query as you seem very knowledgable on all this stuff.  

If I sell the flat is it sensible to put some of the £344k into a pension (maybe £100k) and the rest goes into our home.  Or is it best to just get the house paid down and start building our pension pot?

BonaDea

The limit you can pay into a pension this tax year is £60K (and that may well reduce in the next tax year - let's see what's in the Budget).  And it has to come from earned income.  So drip-feed £60K of your salary before 5 April 2025 into a pension.  Your OH can also pay all their salary up to £60 into their own pension, or if they are not working, can pay £3600 (gross) into a pension.  What's left you can (should?) use to fill your ISAs (currently £20K each per year, but may reduce in future tax years) - perhaps split between cash ISA and stocks and share IS.  Then set aside 6-12 months' worth of outgoings. After that, maybe keep some back for next year's pensions and ISAs (i.e from 6 April 2025), and anything left over into reducing the mortgage.  It's wise to diversify between pensions / ISAs / mortgage because that reduces policy risk.

ReadySteadyPop

N1_EP said:

Hi All,

I am going round and round in circles about whether to sell my buy to let flat to pay down our mortgage before our interest rates jumps up.  I would hugely appreciate your views on this. 

The facts are:

I own a buy to let property in London which I rent out.
Rental Income 1900 pm
Mortgage payments 551 pm (repayment)
Service Charge paid by me each month £150.
So I earn about £1.4k per month (pre tax) - my salary fluctuates as I am a freelancer. Sometimes I am high rate tax sometimes not. 
Outstanding mortgage on the flat is 68k
11 yrs left on mortgage. 
I bought it for 250k current value is likely 480k.
I used to live there so my CGT is reduced slightly if I sell. I will therefore walk away with approx £344k. (as calculated by my accountant).

My partner and I jointly own a house which we live in with our kids is likely valued about 1.1 or 1.2m 
We owe 600k remaining on the mortgage.
Our mortgage payments will jump from £2.4k per month (@ 1.5%)  to £3.6k (if interest is about 4.5% in Oct 25 when we must renew). 
We will really struggle to pay this. 
There are 19 years left on this mortgage.

So my crucial answer is. Should we sell the flat and hugely reduce our mortgage so we can focus on savings (we currently have none) or should I fight to keep the flat and we struggle but know we have an asset for retirement / university for kids. 

Many thanks, 

When did you buy it can I ask?

N1_EP

Hi Readysteadypop, I bought it in 2011.

ReadySteadyPop

N1_EP said:

Hi Readysteadypop, I bought it in 2011.

Base rate was at 0.5% in 2011, it hasn`t doubled in value with rates going back to normal, I can`t see that being possible.

https://www.bankofengland.co.uk/boeapps/database/bank-rate.asp