Selling BTL to pay off primary residence mortgage
Discussion
I currently have two properties, the house I live in and one BTL. Both of these have mortgages, the BTL is interest only and taking the rent into account, it is costing me £460 on top of the rent to pay both mortgages each month.
If I sold the BTL I would be able to pay off my residential mortgage and have around £90K left over. Not having a mortgage on these two properties would instantly save me £460 on my current mortgage commitments(Residential + BTL mortgage = £460 + the rent from the BTL mortgage)
I would then have £90K to invest which I could drip feed into a savings ISA. Looks like I can get 4.51% with a trading 212 ISA, assume I put £20K in this year, £20K in next april that would mean £40K in an ISA and £50K in a savings account I would pay tax on. I would increase my pension payments slightly to get me into the 20% band.
I make that roughly
£40K @ 4.51% = £1804 a year or £150 a month
£50K in a non ISA (Chase are doing 4.5%) = £2250 a year, £1000 is tax free, £1250 at 20% = £2000 a year or £166 a month
So by my calculation I would be £460 (due to no mortgage but losing rent) + £150 (from Isa) + £166 (non isa savings) or £776 a month better off.
I know I will be missing out on the appreciation in value of the rental property, but I would need to pay capital gains on that when I sell it.
Plus I was planning on retiring in 8 years and the only way I could do that would be to take a decent chunk from my private pensions to pay off my residential mortgage which obviously I would no longer need to do.
Anybody got a good argument as to why this is not a good idea?
I will add I have had the same tenants for 8 years now and have had few issues. This is something I am seriously thinking about for if they ever move out.
Also my residential mortgage is currently 2,97% and has just over 2 years to go, I suspect the best I would get today would be 4.1, so would cost me another £100 or so.
If I sold the BTL I would be able to pay off my residential mortgage and have around £90K left over. Not having a mortgage on these two properties would instantly save me £460 on my current mortgage commitments(Residential + BTL mortgage = £460 + the rent from the BTL mortgage)
I would then have £90K to invest which I could drip feed into a savings ISA. Looks like I can get 4.51% with a trading 212 ISA, assume I put £20K in this year, £20K in next april that would mean £40K in an ISA and £50K in a savings account I would pay tax on. I would increase my pension payments slightly to get me into the 20% band.
I make that roughly
£40K @ 4.51% = £1804 a year or £150 a month
£50K in a non ISA (Chase are doing 4.5%) = £2250 a year, £1000 is tax free, £1250 at 20% = £2000 a year or £166 a month
So by my calculation I would be £460 (due to no mortgage but losing rent) + £150 (from Isa) + £166 (non isa savings) or £776 a month better off.
I know I will be missing out on the appreciation in value of the rental property, but I would need to pay capital gains on that when I sell it.
Plus I was planning on retiring in 8 years and the only way I could do that would be to take a decent chunk from my private pensions to pay off my residential mortgage which obviously I would no longer need to do.
Anybody got a good argument as to why this is not a good idea?
I will add I have had the same tenants for 8 years now and have had few issues. This is something I am seriously thinking about for if they ever move out.
Also my residential mortgage is currently 2,97% and has just over 2 years to go, I suspect the best I would get today would be 4.1, so would cost me another £100 or so.
Gassing Station | Finance | Top of Page | What's New | My Stuff