Paying off home loan or buy to let loan first?

New to this forum so apologies if frequently asked..

Should one pay off investment mortgages or own home and what about pension.

We have 2 rental properties, mortgages around 220k on variable interest rate. Atm worth over 450k. Earning below avg rental income but as both work stability and good tenants worth a lot to us.

Our own hse is on 35 year mortgage, 22 years left and still oweing 300k. But luckily its on a tracker.

2 earners in mid 40s earning over 140k pa combined with 3 primary going children. Both paye.
One income stable 60k with defined pension.
One 80k, no pension worth mentioning and not particularly secure.

Savings 130k.
If we wanted to use some savings to pay off mortgage which one should you pay off.
Interest on rental properties can be put against tax. Main hse interest is low so not sure if wise to pay off this but we would be late 60s before paid off.

Should we keep savings for tougher times and use some income to put in pension or is future rental income enough along with 1 pension of 30k and a state pension.

What are the actual mortgage rates on each property?
Who are the lenders - especially the tracker mortgage on your home?

Do you plan on staying in your family home for the next 5 years?

Brendan

All with EBS.
Tracker on home 0.8%

The Variable rates for rental properties are 4.63 or thereabouts.
Yes we plan on staying in home for over 5 years.

You are doing well so far, I would hold keep the savings for cash flow if times get tough. Are the rentals in a rent pressure zone?

I'd keep this really simple.

Interest on your rental properties is only 75% allowable for tax. So the Net cost to you is c. 2.9%
Net cost of PPR is 0.8%

Pay the most expensive first.

You don't need to be holding 18 months net income as savings. Use 2/3 of your savings to pay down BTL mortgages. That'll still give you a huge safety net, and reduced repayments will allow the flexibility to start monthly contributions to a pension if that's the right thing for you.

Thanks for all input. Yes properties are in dublin

RedOnion said:

Interest on your rental properties is only 75% allowable for tax.

Click to expand...

Actually, 85% of interest payments are deductible for the 2018 tax year and the relevant legislation currently provides that this will be increased by 5% per annum until mortgage interest on BTLs is fully deductible again.

That doesn't really change your basic advice though - paying down the BTL loans ASAP and starting to make meaningful pension contributions is pretty obviously the right thing to do in these circumstances.

Keeping €130k in a deposit account earning effectively zero interest while carrying debt (mortgages) with an effective, after-tax, rate of 2.5%+ makes no sense.

Thanks for correction @Sarenco

Fully agree to pay off the investment properties first.


You will have a remaining loan of €90k on one property.

See if it's worth switching to get a better rate. The costs of switching and the short term remaining may mean that it's not worth switching.

Keeping the tracker on your home is very important.

Brendan