Pay off mortgage vs. switching to interest only

H

hp1702

Registered User
Messages
38
Just wondering has anyone had any experience with the following scenario

PPR mortgage o/s balance - 400k
Rental property o/s balance - 29k (approx. € 170 p.m. - variable rate)

I am not familiar with mortage interest relief enough to decide whether to
a) pay off the smaller mortgage balance on rental property and do away with the € 170 p.m.

OR

b) switch the rental property mortgage to an interest only and get the benefit of that.

As I say, I am not familiar enough with interest relief so I am not if the interest relief is greater than the € 170 I am paying - my guess is that it is not.

Comments or advise welcome.
N
 
Dont' forget the tax implications of paying off a mortgage on a rental property - you will no longer get tax relief on any interest payments.

Make sure you build this into any cashflow that you do...
 
hp1702 said:
I am not familiar with mortage interest relief enough to decide whether to
a) pay off the smaller mortgage balance on rental property and do away with the € 170 p.m.

OR

b) switch the rental property mortgage to an interest only and get the benefit of that.
Click to expand...
Always pay any capital sums available off your PPR mortgage, as the full amount of any interest on the investment property (minimal though it must be) is fully tax deductible against the rent, whereas your maximum interest relief on PPR mortgages is 20%.
 
My strategy would be to re-mortgage the investment property to the maximum on an interest only basis. Then use the released funds to reduce your PPR mortgage, or invest in something else.
 
Remember that you can only offset interest on the loan originally used to purchase/renovate the investment property against rental income. You can't offset interest on any top-up used for other purposes (e.g. to clear your PPR mortgage) against rental income.
 
You must log in or register to reply here.
Back
Top