Should I focus on repaying PPR mortgage V BTLs?

[Capricorn 1]

Currently have three buy to let properties. Making full capital and interest repayment on two and interest and partial capital repayment on one. I’m beginning to feel the squeeze big time now with all the wage cuts, extra taxes etc. and am conscious that I’m only managing due to the current low interest rates.

My PPR is on interest only. It’s on a very low tracker rate for the full term of the mortgage which will end in 10 years time. Should I go on interest only on one of the buy to lets and instead make capital repayments on my PPR. My concern is that if in time, due to higher interest rates, I may have to default on the buy to lets. I realise that a Judgement can be made against my PPR. However, the PPR and my job are in Dublin and the buy to lets are in the south east so it would not be feasible for me to sell the PPR and move there. So in the event of a judgement being made, it is unlikely that a sale can be forced on the PPR? I am anxious to protect my PPR.

Appreciate any advice on how to go with this.

 

[Brendan Burgess]

Hi Capricorn

This is a very interesting question and would probably be worthy of a Key Post.

Please provide the full details in the Case Study format so that we can give a full answer.

As I see it, the general principles are as follows:

Pay capital off the loan with the highest after tax interest rate.

If the interest rate is the same on a buy to let and a home loan, pay off the home loan as the tax relief is greater on a buy to let

If you are worried about being unable to service the loans, it suggests that you have too much property and borrowings. You should consider disposing of some of the properties.

The Mortgage Arrears Code protects your home from penalties for falling into arrears e.g. penalty interest or loss of tracker. It does not protect the buy to lets, so it might be worth keeping up the buy to lets, to make sure you are not penalised.


If you are in such serious negative equity that you are effectively insolvent, then hold onto the properties and hope that a property price rise will rescue you.

The Personal Insolvency Act prioritises retaining your own home. So it could be possible to retain a home with positive equity in it while getting a write-off on the buy to lets.

If you have unrealised Capital Gains, the order in which you sell your properties is important.

If you have a Bank of Scotland mortgage, you may be able to do a deal.

But, as I say, provide the full information and we can tailor the suggestions to your particular needs.

 

[Brendan Burgess]

As I wrote the above I got a sense of déjà vu.

There is a similar case here 6 mortgages - which to pay off?

 

[Capricorn 1]

Thanks for your advice Brendan, it has been very helpful.

I was not aware that the Mortgage Arrears Code protects the PPR from penalties for falling into arrears or loss of tracker so this will be a consideration in making my decision.

My PPR is on a very low tracker with Bank of Scotland. It is the lowest rate of all my mortgages. The BTLs are all with KBC, one SVR and two trackers (but higher rate than my PPR). Then there is the fact that I get tax interest relief on the BTLs to be considered.

In order to minimise my exposure, I’ll try to sell one of the buy to lets (the one that is most likely to sell). After that, I’ll just have to hope that there will be some form of a rise in property prices in the future.