What to do with £40k Re-mortgage funds

[Casa1862]

Unfortunately or fortunately depending on your view my BTL purchase has fallen through, I re mortgaged an existing BTL and applied to release £40k for a deposit when my fixed rate ends, the mortgage has not completed yet so I could just tell them I don’t need the additional money, however with interest so low would I be better hanging onto the money?

£40,000 will cost me £73 pm I/O on a 5 year fix at 2.19%

Even if I don’t buy another property and keep the money, could I beat £73 per month for £40k?

[RichS]

Beating 2.17% after tax will depend on your (or your spouse's) personal circumstances, but we did something similar last year. We released a load for an extension that never happened (better than releasing an extension for a load that never happened, I suppose, ooh-er missus). Anyway, I, or should I say my wife, wisely invested it in an equity tracker and easily beat the mortgage interest rate. She doesn't pay income tax (or wasn't liable to it) so it was all upside. Ok so we're not going to retire on the difference between what we owe and what we paid, but better off in your pocket than the bank's. Actual 3018 returns may vary in a tracker, do your own research, etc etc

[p1stonhead]

I have similar amount in a Vanguard LS100 account. It did nearly 14% last year IIRC.

Obviously depends on your risk appetite at this moment OP.

[Casa1862]

Thanks for the replies, I'm not looking to put this into a risky investment as it's borrowed money, I'm simply doing it because it's cheap and the opportunity is now as it's remortgage time. I've got two plans:

I could setup two Santander accounts paying interest of £20pm each (£40 for both), take the £40 pm off the £73 so £33 to borrow £40k. I can claim the tax a back on the extra payments for the BLT, so basically it's free, am i missing something?

Alternatively, I've been overpaying my residential mortgage by twice the contracted payments, down to £100k now and I aim to get it paid in 5 years and be Mortgage free. In about 6 months time I'm out of my fixed rate for the residential, I'm thinking take a Offset mortgage which are typically 1.85%, put the £40k in the offset, add my repayments to the offset account and I could be mortgage free much quicker, plus if anything decent comes up on the BTL front I've got the cash in the offset account, no need to remortgage the BTL unless it's worth it and they have increased. I'll be paying the difference between 2.19 and 1.84% so probably less than £10 pm.

I appreciate I'll still owe the £40k after 25 years, but what will that be worth in todays money, surely a very cheap way to borrow money?

[LeoSayer]

Casa1862 said:

I'm not looking to put this into a risky investment as it's borrowed money,

You don't think BTL was risky?

[Casa1862]

At the moment I think it is hence why I'm holding back and making plans for not using the extra money for a btl, I'd only consider it if it was a very good purchase with a 65% ltv.

My average ltv is about 50%, the mortgages are about £200 to £250 per month, I've kept the revenue from the properties for the last few years so the risk is lower but I agree it's still present. I've been burned with shares, so unless it's going into my pension I'm staying away for a bit.

[covmutley]

LeoSayer said:

You don't think BTL was risky?

Very good point. I would just get the main mortgage gone (you are not too far off!) then sort investments.

Edited by covmutley on Thursday 18th January 22:26