Fast-approaching deadline for Interest Only BTL mortgages.

Hi all

Recently inspired by reading the very absorbing and impressive debt-free wannabe posts titled: 'I don't need another latte', I decided to grasp the nettle and log my own story to being mortgage-free.

My posts will focus on paying down two buy-to-let properties. Both of which are on Interest Only mortgages and the capital of which must be repaid in the next 8 years approx. And here's where it gets interesting - both are in negative equity!

I am a contractor which means my monthly income can change based on the number of work days each month and the number of holidays I take.

I currently deposit a fixed amount of my salary to a joint account. My OH is very organised and efficient on money matters, so for the purposes of this exercise, I am just going to focus on the surplus I have after paying my contribution to joint mortgage and monthly bills. We don't have kids (but do have pets which require regular and expensive visits to the vets!).

BTL1 Property:
Value: £78k
Mortgage Balance: £97,279.47
Negative Equity: £19,279.47
Mortgage Rate: 5.04%
Mortgage Payment: £450 (£411.42 plus overpayment £38.58 (paid into offset-style mortgage)).


BTL2 Property:
Value: £68k
Mortgage Balance: £104,277.87
Negative Equity: £29,279.47
Mortgage Rate: 5.04%
Mortgage Payment: £450 (£437.96 plus overpayment: £12.04 (paid into offset-style mortgage)).

I have two other BTL mortgages which generate an income, some of which I will use to pay down BTL1 & BTL2.

I appreciate I am in a very lucky position, but that doesn’t detract from the fact that I must pay down BTL1 & BTL2 capitals in the next 8 years. I’m hoping with some MSE focus I will stop wasting money each month and get these mortgages down so that I can retire early.

I have spent the last two months improving my finance situation MSE-style. I paid down the capital of my PCP car payment (4.5%) and plan to pay down balloon payment on 14th September (6 months early). Although, I will be debt-free, I will also be savings-free!

Monthly SOA*:
Ltd Company income before tax and after contribution to joint mortgage and household bills: £4,500
Total Rental Income: £2,398
Total BTL Mortgages: £1,200
BTL1 Overpayment: £1,000
Property Agent Fee: £25
Corporation Tax: £1,000
PAYE: £100
Accountancy fees: £76.30
Savings: £170 (direct debit setup within my NatWest current account)
Petrol: £140
EE Mobile Phone Contract: £33
Joint Health Care with Vitality: £159
Spends: £340

Total income: £6,898
Total Outgoings: £4,243 (this does not include property fees and costs).
Variance: £2,654.7

*Some figures are approximates and will be refined with time

As I jiggled some mortgages around this summer, I intend to overpay BTL1 by £1,000 from September with rental income from BTL3.

As my BTL1 & BTL2 mortgages are in negative equity, I must stick with NRAM until the mortgages are 75% LTV. My aim is to pay down BTL1 to 75% LTV (£56k), after which I can negotiate a better mortgage rate. I will then focus on doing the same with BTL2 (75% LTV is £51k). The values of these properties is increasing by approximately 3% per annum, but the rental potential will remain static for the forseeable future. I have no repayment limitations.

Next steps:
1. Set target overpayment for BTL1 for end of 2018. Completed: Target £89,999.00
2. Investigate penalties for overpaying BTL1 mortgage above £1,000 per month. Completed - there are none.
3. Determine how much extra savings I can put aside for emergencies (I always prefer to put extra funds toward mortgages, but I do need an emergency fund). Completed: Target: Extra £130 on top of current target of £170.
4. Document adhoc fees which occur throughout the year including, but not limited to: rental property maintenance services, physical property maintenance and gardening fees, non-UK property taxes, communal electricity bills. Work in progress.
5. Breakdown current monthly spend to smaller categories e.g. hairdresser, dentist, clothing, sports hobby, socialising, lunch and some food) to determine if it is accurate. Work in progress.
6. List items for sale on eBay and/or Facebook marketplace. Completed for 2018: I have sold approximately £900 worth of goods online.
7. Calculate utility bills owed to me from tenants. This job always lingers on the bottom of my list and costs me money. And annoyingly, it is not difficult but can yield a tidy sum! Completed.
8. Learn how to update my MSE signature and use emojis! Completed! :j

Although my posts will focus on paying down BTL mortgages, I expect the approach taken to save money will be similar to others here. Ultimately, I hope posting on this forum will help me focus on paying less interest to the banks!

Thanks for reading this far – this exercise itself has helped clarify my expenditure! Comments are welcome.