Pay off mortgage or BTL

[unixman]

So I have around 80k left on a 215k mortgage for a house now worth around 300k. Been chipping away at it and I reckon in 2 years I could be mortgage free. Plan B says don't do that and use the cash for a couple of BTLs instead (looking at 100-150k properties so 40k deposit on each). Reasons for BTLs is to give one each to the 2 kids eventually as a head start when they are old enough (6 and 4 now). So better 2 pay off or BTL, thoughts?

Pay off your mortgage first. Then do the other. By paying off early, you also pay much less. If your mortgage drags on for another 15 years instead of two, you lose all that interest. I admit the effect is reduced with interest rates as low as they are now, but they are likely to rise in the years to come.

Regarding giving property to your kids, do it carefully. It could be deemed as "divestment of assets" in order to evade inheritance tax.

[SlipTheJab]

Pay off your mortgage first. Then do the other. By paying off early, you also pay much less. If your mortgage drags on for another 15 years instead of two, you lose all that interest. I admit the effect is reduced with interest rates as low as they are now, but they are likely to rise in the years to come.

Regarding giving property to your kids, do it carefully. It could be deemed as "divestment of assets" in order to evade inheritance tax.

Am overpaying by 50% at the mo, so only 5 years left as it stands if I pay no more. Regarding house for kids. I'm thinking they get in once I've popped my cloggs

[northernladuk]

Offsets charge ridiculously high rates 4% plus, for the mugs that are prepared to pay that!

Depends how much spare cash you've got doesn't it. Sheesh. Some people.

[MarillionFan]

Depends how much spare cash you've got doesn't it. Sheesh. Some people.

There's a few fallen out of the stupid tree today.

[CoolCat]

Over at housepricecrash dot com they seem secure that house prices are going to slump big style in the near future

[ChimpMaster]

BTL.

No need for me to repeat what has already been said but try to buy BTL property for yield rather than speculation on price appreciation. That way you can invest knowing that you will get a decent rental income that can be used to (a) pay down your BTL mortgage and (b) to pay down your residential mortgage. I did this for several years before paying off my resi mortgage, though I would have been quids in had I instead bought more BTL instead of paying the resi off.

[Lockhouse]

BTL.

£80k is nowhere near enough money to have leveraged in the property market at the moment.

[diseasex]

BTL.

£80k is nowhere near enough money to have leveraged in the property market at the moment.

Maybe in London , in Manchester you can buy a house or flat for that so not even need to leverage ...

[stek]

Maybe in London , in Manchester you can buy a house or flat for that so not even need to leverage ...

But then the yield is shiit....

[WordIsBond]

OK, explain what is incorrect about a 1% increase in interest rate costing an extra 15% on a £100k loan.

Well, simple math tells you that if you would have paid £125K without the increase, the extra £15K is NOT an extra 15%. It's 12%. And that assumes he isn't going to be using rental income to, oh, I don't know, reduce his mortgage, maybe?

You have to look at the total picture.

Anyway, for me, the liquidity issue would make me dubious about the BTL. So would the fact that I personally think there is a non-negligible risk of a crash, due to war, Euro collapse, Chinese slowdown, or some combination of those and other risks, so increasing leverage is not something I'd be doing right now. But OP is relatively young (based on age of kids), so can perhaps wait long enough to recover before selling if bad stuff happens, as long as not too highly leveraged. I wouldn't do it but it might work very well.

As for the kids, teach them to code. That's likely a better inheritance than some BTL.