Any Financial benefit paying off your investment property mortgage ?

Assuming someone is maxed out with their pension and home loan paid off. I can’t figure out financially whether it’s worth either overpaying on your investment property mortgage, or paying a chunk off if you have a lump sum.
The disadvantage is by paying down the capital on the mortgage, you loose the benefit of offsetting this extra mortgage interest against your tax bill.
Would this decession be effected by your mortgage interest rate ? I guess the higher the rate. The more mortgage interest you pay, however the more you can offset.
Would it be worth investing these excess funds in the stock market instead, especially for someone who is over exposed in property?

"The more mortgage interest you pay, however the more you can offset."

The more damage you inflict on your property, the bigger your tax deduction. But that's a poor reason to inflict damage on your property.

And overhead costs are not "offset" against tax. They're merely counted as deductions from the income upon which taxes are levied. So the more overheads you incur, the more you lose, before and after tax.

@landlord

The right way to look at is to consider, the net cost after tax.

So if the interest rate you are paying is 5% and you pay tax at 40% , the net rate is 3%.

If you have a mortgage on your home at 4%, then you should pay off your home loan first.
But if you have a mortgage on your home at 2%, you should pay off your investment property loan first.

If you have no other loans, then ask yourself if you can get a net return of 3% after tax and charges on a deposit. Answer: No, then pay off the loan.

You can invest it in the stockmarket and you might get 3% but it's not worth the risk.

Brendan

Thanks B
My Interest rate is ECB +0.75% or currently 3.4%

So net rate approx 2% RE stock market possibly slightly more tempting…

Yes, if you are investing long-term in the stock market, you should do better than 2% net.

And it seems as if you are well capable of handling the risk if there is a sustained fall.

The additional benefit is that if you need the money to buy a car or change homes, you can always sell some shares. You can't reborrow the money you have paid off.

landlord said:

Would it be worth investing these excess funds in the stock market instead, especially for someone who is over exposed in property?

Click to expand...

If one is overexposed in terms of property then maybe this is an XY problem and the more appropriate question to ask is "should I rebalance my portfolio by selling some of the investment property and reinvesting the proceeds elsewhere that is more appropriate from a diversification and risk mitigation point of view?"?