Paying lump sum off Rental Property

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Hi folks,
Have a query that you may be able to assist me with.
Recently, it has become possible for me to pay off the outstanding mortgage on my property due to an inheritance. And while it is great to be able to do so, I realise there could be some complications.
The property in question, was my home but down to economic downturn I had to relocate. It is rented out, and the rent covers the mortgage.
My partner also has a property, in negative equity and long term we would like to buy a house and be rid of the two apartments, nice as they are.
I’ve noticed that the price of houses has fallen considerably, but with an apartment each and one of those definitely in negative equity it’s hard to know what to do with the inheritance money.
Should I clear the outstanding mortgage and continue to rent the property out?
I understand I might loose some reliefs and be liable for higher tax on the rental income.
Or should we try to bank the inheritance, and put that towards a house deposit in a year or two?
Obviously, our respective lenders would bite the hand off the inheritance money, but I’d be interested in getting peoples input here first!
Thanks
 
It very much depends on the levels of debt on each property and their respective interest rates. You need to pitch those figures versus what you might make putting your windfall on deposit or some other safe investment. I would suggest that if either mortgage is a Tracker, hold on to it and don't pay off early. As regards the rental, you should be advised that if your bank finds out that you are now renting the property that was to be your principal residence, they may seek to increase the interest on the mortgage to "investment property" status. You also need to ensure that you stay square with Revenue on the rental income. 75% of the mortgage intereset can be put up against your rental income before it starts being taxed. If you put up some figures on each mortgage and interest rates, more considered advise could be given.
 
As John Jo says, please provide the following information for each property and for each of you

Estimated Value of property
Amount outstanding on mortgage
Rental income (is your partner's rented?)
Interest rate on mortgage
Term remaining
Lender's name

Amount of savings
Current gross salaries
Types of employment - permanent, safe etc.
 
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