Pay off a Buy to Let

berbatov10
berbatov10 Posts: 372 Forumite
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in Mortgages & endowments
I have 2 BTL properties. I have inherited some money which would allow me to pay one off. The current mortgage is just coming to an end on this property.


I earn around £46000/year and another £15000 (before tax) from my BTL's. I have no mortgage on my own home. I intend to work for another 2 years after which I will no longer be a high rate tax payer as I wont earn enough.


Should I take out a further BTL mortgage for 2 years covering until I will drop to being a lower rate tax payer.


Thanks in advance
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Comments

  • ACG
    ACG Posts: 23,726 Forumite
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    At the minute you can still declare the bulk of the interest as an expense - in turn reducing your tax bill. Especially as a higher rate tax payer, I suspect you would be better keeping the mortgages. It might be worth speaking to an accountant/tax advisor before making any decisions.
    I am a Mortgage Adviser
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  • Nearlyold
    Nearlyold Posts: 2,288 Forumite
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    You need to compare the difference between

    The net cost of the interest paid on the mortgage after any "tax relief" is taken into account.
    &
    The net interest you would receive after tax on the money if you don't redeem the mortgage.
  • dimbo61
    dimbo61 Posts: 13,716 Forumite
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    You are already a higher rate tax payer so any money you pay into your pension will attract 40 percent tax relief which you can take in two years ?
    25 percent as a tax free lump sum !
    You could then use some of that lump sum to clear the mortgage or both mortgages.
    Really you need to speak to your accountant to find out the best way to maximise the money you now have
  • berbatov10
    berbatov10 Posts: 372 Forumite
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    The sum involved is £73000. I can get maybe 1% interest on the money if I don't pay the mortgage off but on an interest only mortgage I can claim it all as tax deductible
  • dimbo61
    dimbo61 Posts: 13,716 Forumite
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    Do you have a wife/ partner ? Do they have a pension or pay tax ?
  • berbatov10
    berbatov10 Posts: 372 Forumite
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    I have a partner who has no pension but pays tax
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    Are you 55 or approaching it ?
  • berbatov10
    berbatov10 Posts: 372 Forumite
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    I am 55 heading towards 56.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    berbatov10 wrote: »
    I am 55 heading towards 56.

    OK so that puts you in a great position. You said "I can get maybe 1% interest on the money if I don't pay the mortgage off but on an interest only mortgage I can claim it all as tax deductible"

    So, if you pay the money under discussion into your pension, you get 40% on it (since you pay HRT) and pay (effectively) 15% on it when you withdraw it. So, an almost immediate 25% boost since your pension is accessible to you and you'll be withdrawing from it soon.

    Where else would you get that? And this is your final chance , whilst you are still a high tax rate payer.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    The will only be around £15k probably less to pension each year for 40%.
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