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  • Debt & Negative Equity

    Help Deciding Which Mortgage to Pay Down

    Hello tribal property people.

    I would appreciate some Help and opinions on which debt YOU would pay down first with resaons why if possible.

    Deleveraging Options. All interest only.

    • debt 250k 4 bed Semi - 15 Year term left   and No early redemption penalty.

    0.85% plus bank of England base rate = 1.35 % presently

    Unlimited overpayments possible.

    • Debt 90k 3 bed Semi - 16 Year term left

    1.75% PLUS bank of England base rate = 2.25% presently.

    Limited to 10% overpayments.

    • Debt  36 K two  bed mid terrace -18 year term left

    5 % SVR         Limited to 10% overpayments

    • Debt 40k  two bed mid terrace - 18 year term left

    5% SVR         Limited to 10% overpayments.

    Thank you for responses.

    Edit - Savings approx 75k

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 

    Too little info really I`m afraid  . Depends on what your future plans are

    How much capital within.  Do you plan to sell any. What time frame . Yield

    What income do you want . Do you plan to live in one ever for PPR relief

    What your tax position is .  Are you planning to invest again

    Tons  of variables -

    But on the face of it pay down the most expensive one first


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    Jonathan Clarke. http://www.buytoletmk.com


    Thanks JC -

    which debt YOU would pay down first with resaons why if possible.

    I appreciate there is lots of variables and depends. Smile

    I'm guessing YOU would

    don't pay down any? And wait.

    capital - 75% LTv on largest .Residential - but produces income 

    No plans to sell or downsize Ever.

    80% Ltv on 90k and 

    approx 65% LTV on 2 beds.

    no more plans to sell any ( unless political landscape changes and make better money elsewhere)

    future plans - just be comfortable. 

    i do have another strategy , but chose to keep the options simple and easy to digest. Pure numbers. Not given yield as I maybe paying down with earned income from elsewhere.

    Aim to stay as BRT but could easily be in HRT if I decide to work more.

    Most likely debt paydown Fast and furious route rather than slow and steady.

    but the post is about what you would do?

    ​appreciate any help. 

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 

    My gut says don`t pay down as that curtails future options

    I also look at the term on the mortgage . Some are ending  2037

    Bust a gut to buy and borrow so I dont want to pay down yet as i dont have to yet

    If the term is only 5 years away that focuses the mind differently

    And as rates are so low I can use the cash better to invest elsewhere

    Your most expensive debt is 5%

    Can you make then more than 5% after everything else is accounted for .

    Tax being a real biggy consideration of course these days

    If the answer is yes then dont pay down .

    I aim to make 20% minimum on each £1 in my pocket

    I therefore don`t want to lose 15% of my earning capacity by paying down a 5% debt

    Once its gone its gone

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    Jonathan Clarke. http://www.buytoletmk.com


    I don't have your ability to make 20% I'm afraid, .you are special and outstanding. And can afford the risk with most likely very good equity position.

    I suppose whats creating the urgency is need for streamlining. And the ability to refinance being a factor now and at future date.

    The stress test on the 5% ones at bank Bank of England base rate of historical average of 5%  means 10% rates.

    Shortly I may have the option to pay of  approx 75k of debt - so considering paying off the 2 bed terraced and having 2 unencumbered properties in one go.

    I used to say get in as much good debt as possible ( rates are low)

    and today I'm questioning the logic of building up a house of debt cards or gambling on the future.

    Especially with below average capital gains after 10 years. (Performance to date- I chose wrongly )

      Any expansion costing 3% stamp duty mimimum.

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 


    Yes that is what I would incline towards in that case . Makes sense


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    Jonathan Clarke. http://www.buytoletmk.com

    Don't get me wrong I'm still sat on the fence. Learn from my mistakes and move forward

     but just wanted to consider all safer options first.

    Spouse likes this idea the best  ( pay down debt) limited imagination with traditional debt views.

    I wanted to use 75k to buy cash and uplift and recycle.

    But then again my gambling gene might be at play here. Smile

    Thank you JC for your insights

    Have a nice day.

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 

    Hi Investorsk8,

    You said:  "I suppose what's creating the urgency is need for streamlining. And the ability to refinance being a factor now and at future date

    The stress test on the 5% ones at bank Bank of England base rate of historical average of 5%  means 10% rates.

    Shortly I may have the option to pay of  approx 75k of debt - so considering paying off the 2 bed terraced and having 2 unencumbered properties in one go.

    I used to say get in as much good debt as possible ( rates are low)

    and today I'm questioning the logic of building up a house of debt cards or gambling on the future."

    I've changed to bold what I think is the key thing that you said here.  In using the words "urgency" and "need to streamline" I think you recognise and acknowledge that you need to do this; not least for the sake of "the ability to refinance being a factor now and at future date".

    What I'm getting from you is a real reluctance to do what you know needs to be done - paying down that debt.

    I understand how you feel.  I have paid down / paid off mortgages myself and it can be uncomfortable, not a nice feeling.  You have this big lump of cash and choosing to say goodbye to it and hand it over to a lender instead of continuing to see it in your bank account or do something more exciting with it, can feel like pricking your own bubble (/ or blister, which arguably can be a good thing!)

    Most of us when we get into property investing (or  'being an entrepreneur'Wink develop a certain mindset of going for it - onwards and upwards.  In the early stages, that's appropriate up to a point.  It's like we're running up that hill, trying to take off!!

    I remember when I started out, it was scary at first and I read Feel the Fear and Do It Anyway by Susan Jeffers.  That helped me develop the go go mentality.

    Yesterday, I wanted to choose a cd set to listen to in my car and chose End the Struggle and Dance With Life, also by Susan Jeffers.

    End the struggle is her later work and better reflects my thinking now: Life doesn't always have to be a race, we can't always be running up that hill.  Sometimes you're better off dancing with life.

    Dancing  is about taking two steps forward, one step back; two steps forward, one step back.... Sometimes the step back is what's needed to make life more of a dance than a struggle.

    I hated to say goodbye to the cash in my bank, but I knew it was the sensible thing to pay off several mortgages (and my tax bill!)   I knew it was all for the greater good and that I'll be dancing and laughing more in the future because of that decision than if I had just mindlessly kept running up that hill - running up debts!

    Angela

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    Author of The Complete Guide to Property Strategies and The Complete Guide to Property Investing Success
    Learn more at http://www.completepropertysuccess.co.uk

    I also post property updates on my Facebook Page

    "It is the small decisions you and I make every day that shape our destiny" Anthony Robbins


    I would pay down the highest LTV first if it is going to be a keeper.

    The BTS idea sounds a good way of earning extra income for paying down purposes if there's a high chance you can earn the £ you need in a sensible timeframe.

    I think everyone knows if push came to shove what they would let go of first.

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