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Pay off Mortgage or buy another?

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  • Pay off Mortgage or buy another?

    I have a question to pose.

    I own a property with a remaining 130k mortgage to pay off. In august I will go to a variable rate mortgage and will at this time be elligible to pay an interest / penalty free cash payment ont he mortgage.

    The property is currently rented out (on an ex-pat but to let mortgage) and basically the rent recieved covers exactly the mortgage payments with steady tenant for past 2 years.

    I have some savings now and have the decision to make to either pake a payment and basically half my mortgage payments or use the same cash to make a deposit on another property to again let out and let the tennants pay my mortgages.

    The above is assuming the banks loan me money again...

    I am at the stage to toss a coin to know which is the best option...

    Any advice would be appreciated.

  • #2
    Re: Pay off Mortgage or buy another?

    If the rent received exactly matches the mortgage amount then you are actually losing money since you are not taking into consideration any maintenance costs. I am also a little surprised that you would have this on a BTL mortgage of any sort because one of the criteria on a BTL mortgage is that the rent coverage on the mortgage repayments has to be at least 1.25. In other words if your mortgage repayments were say £6,000 per annum, your in coming rent would need to be £7,500 minimum for the mortgage to be granted.

    I would be rather more scientific than tossing a coin and get yourself some property training if you really want to be a landlord. If you don't then just pay down some of your current mortgage to give yourself more equity and also breathing space between your rent and mortgage repayments. At the moment you're cutting it a bit fine IMO.

    HTH!

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