BTL Mortgage - Should I clear the balance OR can I remortgage?

FrankRizzo

Hello,

I have a fairly small balance left on my BTL mortgage and I don't pay a lot of interest.

I have never paid it off, as im not sure if it would ever help for future borrowing e.g. could I remortgage and borrow against the equity/property? I will need to borrow money in the near future as my own house needs a new roof.

I always remember my mother saying that its good to keep a mortgage open for this type of scenario, but im not sure if in todays world this is still the practice?

If not, are there any other advantages for keeping the mortgage account open?

Any help appreciated.

Thanks

Frank

FrankRizzo

@ACG  @LRmortgage @kingstreet - can you guys kindly help?

El_Torro

As I understand it there is no longer a big advantage in keeping a small mortgage running for the sake of it.

One thing to bear in mind is the tax benefits you are getting from having a mortgage on the property. Presumably you are reducing your profits with the interest you are paying on the property (reduced profit means less tax to pay).

There shouldn't be a problem in paying off the mortgage now and getting a new mortgage later on if necessary.

GrumpyDil

Mortgage payments are not deductible when calculating rental profits but are given as a 20% tax credit. If you are a lower rate taxpayer that is ok but once you become a 40% taxpayer that can mean instead of making a profit you end up making a loss.

Isthisforreal99

Surely any 'tax benefits' need to be compared to.the bigger picture - paying £1000 interest to recieve £200 off your tax bill seems bonkers imo. Most can't avoid this scenario as a mortgage is essential but if you can avoid paying an amount to receive only 20% back then surely it's a no-brainer.

FrankRizzo

https://forums.moneysavingexpert.com/discussion/comment/81882955#Comment_81882955

Sorry if stupid question - do you not get the 20% tax credit, if your a 40% taxpayer?

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81883323#Comment_81883323

Yes you do now , but it used to be a full 40%/45% relief, so the s24 change has been bad news for higher rate tax paying landlords.

As regard your primary question, keeping your current mortgage outstanding and seeking a remortgage from your current provider can make sense. This is particularly the case if they can offer you deals that avoid valuation and solicitors fees and even product fees.

Check their current roster of products to see what they can do for existing borrowers.

Incidentally, you appear to be on a repayment mortgage, which is unusual for BTL. Give some thought has to whether that is the type of new loan you would require in future.

Bear in mind your capital repayments are never tax deductible, and with only a 20% tax credit for interest, the future profitability of the property as a standalone net income investment could become questionable.