What’s the interest rate ?
Once payed off you don't have to worry about rate changes, get a larger pay-out if you sell and if you overpay you can can get 25 year down to 10 year or less or which means 15+ years of full rent in your bank account with no rent going towards interest. If you can afford to overpay you massively cut down on the interest paid. Less slack in the short term, more slack in the long term.
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Indeed but you lose the relief on the interest (although only 20% of the interest now). so often better to have a parallel saving for the surplus if you have a savings rate higher than the mortgage
Obviously depends on circumstances but mine is currently 2.6%
Obviously depends on circumstances but mine is currently 2.6%
Most of the Landlords I know are on interest only and are selling up for one reason or another. The few not on interest only are on around 4.8% 2 year fixed.
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3%ish
Literally just middlemen for banks, why even bother?
Caporegime
Interest only when rates were low was basically a license to print money. House prices were flying up due to low interest rates and low interest rates meant the proportion of the rent eaten up by interest was low. I imagine that anyone who has bought more than 5 years ago has done very nicely out of it.
Surely you can put the repayments into saving at a higher rate than this ?
Probably but I’ve enough cash savings as it is. I’d rather pay off the capital
There was a conversation on LBC about this I watched earlier today.
Landlord was claiming its all down to costs, then stuttered to find an answer when told a majority of landlords state as reason for large increases are to "match the market".
Soldato
Our tenant is moving out - they've had a 2nd kid and want somewhere with an extra bedroom.
We are now considering whether to sell.
Flat is worth about £130,000, income return we've had over the last 8 years has averaged out at about 6% (including property increases). We've also been lucky with decent tenants and short periods of vacancy. We've also not increased the rent for the current tenant for the last 3 years as they are decent people and it just felt unfair.
I've got a sneaking suspicion that Labour will make being a landlord less worthwhile over the next 4 years - not something that I have a problem with but it needs to be taken into account.
So the question is what else could we do with our money that might achieve a similar return? ISAs/SIPP all come to mind as alternatives.
We are now considering whether to sell.
Flat is worth about £130,000, income return we've had over the last 8 years has averaged out at about 6% (including property increases). We've also been lucky with decent tenants and short periods of vacancy. We've also not increased the rent for the current tenant for the last 3 years as they are decent people and it just felt unfair.
I've got a sneaking suspicion that Labour will make being a landlord less worthwhile over the next 4 years - not something that I have a problem with but it needs to be taken into account.
So the question is what else could we do with our money that might achieve a similar return? ISAs/SIPP all come to mind as alternatives.
Still makes no sense on an excel sheet but understand the physiological effect of paying off.
It's also a relatively small mortgage so putting the payments into a bank account instead of paying the mortgage capital would garner peanuts in interest.
Indeed. But other things come in. If you are paye and in the 60% tax then the interest not reducing due to repayments is also a factor. Look after the pennies and the pounds look after themselves. There is no excel sheet saying paying off mortgage at 2-3% is better than repayment. Anything else is just ‘feeling’
Soldato
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- 24 Sep 2007
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Yes, the main alternative is investing in UK shares with a decent dividend, or a fund that does it for you. It takes homework to get it right though, and you won't get 6% yield.
I’m not even in the 40% tax bracket in Scotland nor am I in PAYE.
Is it mortgaged?
Soldato
Net profit but before tax.
Nope.
Our kids are also both starting uni in the next 2 years so it might be nice to have some liquid assets rather than a flat.
Edging towards selling at the moment....
Mine was, so it was much easier to make the decision with reducing interest relief and increasing mortgage costs. But regardless, I'm much happier without it and with most of the capital in index funds instead.