Pay lump off mortgage or invest in 2nd property?

[s91]

If you had mortgage of around 90-100k (works out to around 125-130k with interest) to be paid off over 20 years, with a 5 year fixed rate, and could save up a reasonable amount of money say around 40k over the 5 years, would you be better off paying 40k off the mortgage after the 5 year fixed term is up and the early repayment charges no longer apply (before re-fixing if interest rates are good) or would it be a better move to invest that 40k into another property to refurb and sell/rent? Money would be tight paying into a 2nd mortgage until it was either re sold or rented out.

Edited by s91 on Friday 5th January 03:16

[kurt535]

s91 said:

If you had mortgage of around 90-100k (works out to around 125-130k with interest) to be paid off over 20 years, with a 5 year fixed rate, and could save up a reasonable amount of money say around 40k over the 5 years, would you be better off paying 40k off the mortgage after the 5 year fixed term is up and the early repayment charges no longer apply (before re-fixing if interest rates are good) or would it be a better move to invest that 40k into another property to refurb and sell/rent? Money would be tight paying into a 2nd mortgage until it was either re sold or rented out.

Edited by s91 on Friday 5th January 03:16

- keeping or selling can depend on yield vs cap appreciation of property when done. I recently restored a house in an upmarket seaside town to take the cap appreciation as opposed to potential rent which would have only yielded @2.5%
- current market, anything you buy be equally happy to keep it
- interest only or repayment? bearing in mind govt is stopping private investors putting interest agains profits
- how easy is it to rent or sell too?
- what's your medium term financial requirements? House refurb always escalates!

[sidicks]

s91 said:

If you had mortgage of around 90-100k (works out to around 125-130k with interest) to be paid off over 20 years, with a 5 year fixed rate, and could save up a reasonable amount of money say around 40k over the 5 years, would you be better off paying 40k off the mortgage after the 5 year fixed term is up and the early repayment charges no longer apply (before re-fixing if interest rates are good) or would it be a better move to invest that 40k into another property to refurb and sell/rent? Money would be tight paying into a 2nd mortgage until it was either re sold or rented out.

Edited by s91 on Friday 5th January 03:16

Over the long-term you’d expect to get a higher return on your 2nd property than the cost of your mortgage, even after allowing for the higher risk.

However, in the short-term you could be facing significant costs without any income to support them.

Only you can know how ‘tight’ money could potentially be and how problematic this is for you.

[BoRED S2upid]

Yes pay off the lump sum.

[redandwhite]

Would also agree with paying off the lump sum. Get rid of your mortgage first then you will have the freedom to invest in a 2nd - rather than carrying that financial responsibility around when having 2 on the go.

[Bullett]

Would you not be better off making 8k of overpayments every year?

[Craikeybaby]

Bullett said:

Would you not be better off making 8k of overpayments every year?

That would have been my suggestion. OP - what are the early repayment charges/thresholds on your mortgage? For example on mine I can overpay by 10% of the outstanding balance each year, with the early replayment fee dropping by 1% each year util the end of the fix.