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  • Property-a-holics

    What is your mortgage pay back strategy?



    Just interested to see what other PT'ers are doing and their strategy behind it.

    I don't plan on selling as being in the SE it's doubtful it'd be possible to buy them for the MV I paid all those years ago, so paying down the IO mortgages in very small regular chunks is my strategy.

    I pay off £500 at a time, and I do this very regularly, multiple times a month most months. Why £500? Well, £1000 at a time would re-calculate the IO monthly interest payments and I'd rather keep that the same than it be reduced by lets face it a few pennies each time. Plus, I don't miss £500 as there's not much I can really do with it investment-wise. If it were a bigger chunk like £5K I'd be tempted to invest it into something else!

    So my strategy works well for me knowing how I'd invest elsewhere a larger amount, but £500s do add up when they're done many times over a year.

    So what's your repayment (or not) strategy? Are you going to sell one/more to pay off the others? Or look to do large chunks off a mortgage every now and then? Pension? What?!

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    Great question Adam, thank you for posing it!

    Our portfolio is mainly in London and the South East and has done very well capital growth wise.  A 1 bed flat we purchased for £147K in 2004 was recently valued at £340K. Smile

    It is our intention to sell off a number of properties to leave around 7 of them unencumbered, including paying off the mortgage on our on home.  All the flats will be sold, and we will keep the houses for income.

    I am so glad we focussed on quality in the SE as opposed to quantity in the North.  This thread is related to that:

    Why higher value properties are better 

    Interested to hear what others say ...

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    I have never been a great lover of paying down investment Property Mortgages

    But That's not to say having a Plan B is not a bad thing

    I prefer to invest money in an ISA with Managed funds and build up a Tax Free pot of cash for later years

    If you do pay down your Mortgage the cash is locked away in the property and you can only get it back if you sell

    or if you Remortgage but with S24 Im not doing that

    I also invest the Max I can in Pensions Now  40% tax relief is good and helps with S24 too

    If you take a 20 year view your Mortgage should look smaller due to inflation and hopefully you will see a little growth in the coming years

    Debt is not a bad thing if its used with care

    I don't Purchase property now with Mortgages But I will look at the property I have in 10 years time when Mortgage Terms come to an end

    and do a rebalance of the Business

    I must say I like Options in property as none of us know for certain what the future will bring.

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    Learn Change and Adapt ?????


    I sold a couple of high value properties over the last year or so and bought our dream house (well maybe, that's another story) for less, using the difference to reduce mortgages.  I then ran spread sheets to work out the payments on a lot of my buy to lets, if I turned them from interest only into 10 year repayment mortgages.  The amounts seemed tight, but  just about manageable so I left the mortgages as interest only, but phoned the various lenders and told them the new monthly overpayments that I wanted to make.

    I am now ticking down nicely into my 10 year repayment, but on a phonecall can go back to the io amount with no questions asked, so I feel fairly safe.

    I do love tracking the capital balances down each month.  It gets addictive.  I actually accelerated this on one property and now only have 17 payments left on it.  After that I will accelerate the next.

    I remember when my father moved all of his properties onto 5 year repayments mortgages and was really careful for 5 years.  I also remember how pleased he was when the last payment was made, and I am now working towards the same.

    The power of leveraging has long since been replaced by the risk of interest rate rises on incredibly low yields in the South East so I have lost all interest in doing more and this is working for me.  If I stick to this, then in 10 years time, at 54, it will be like being given a massive pay rise.



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    I had a strategy a few years ago (pre S24) that I did for a couple of years, of paying down multiple mortgages simultaneously with small sums on each.

    However, personally I found it a pain to keep track of including for our accounts... So many letters to so many lenders and so many adjustments on my spreadsheet all the time!

    In the end I said to myself that it would be easier and 'cleaner' to just completely pay off one mortgage at a time, so I started doing that.

    It was a lot easier administratively, but I must admit psychologically it is not so easy to pay off a whole mortgage of over £100k in one go, when the money was sitting nicely in my bank account:-(

    We now have a pile of cash sitting there which Dave wants me to make more capital repayments with but I'm reluctant, just in case a great development opportunity comes along or something...

    I'm not convinced it's the way to go to be totally mortgage free, I mean not because of S24 (just 'one day' in old age).  My aim has been to get to a 'safe' level of leverage (already done) but keep the portfolio as large as possible, while fighting Dave's urge to sell more and more - and to make capital repayments!

    Angela

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    "It is the small decisions you and I make every day which shape our destinies." Anthony Robbins


    Why not if possible convert mortgages to offset ones

    Usually 50% LTV required.

    But any overpayment leave in the offset savings account thereby reducing S24 liability and giving maximum flexibility

    You can draw the savings money out and increase your S24 bill if you want or pay into the savings account the equal of the mortgage debt.

    You won't have redeemed the mortgage but you will have zero S24 liability.

    Coventry are doing a blinding 10 year fix on offset I think

    2.85%

    Reduce mortgage debt leaving 50% LTV and you'll qualify

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    Good idea Paul. I have 2x NW mortgages up for renewal again in April so will take a look a bit closer to then as they'll both be @ 50%. It'll be interesting to see if your idea works out, as I like the idea of drawing it back out again for a little 'Bobby Dazzler' of a deal!

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    Now; now you are meant to be weaning yourself off leverage  for another blinding deal.

    Be satisfied  with your blinding deals you have achieved to date.

    There will always be blinding deals coming along

    You just have to learn to say NO!!

    You've done your bit

    Time to descale and get spending your income or to reduce debt.

    Nobody is doubting your competence in doing blinding deals.

    But what is it all for and is it really worth the bother

    If I came into money I would reduce my mortgage debt

    S24 is the imperative

    I don't mind reducing mortgage debt as S24 makes it pointless having that much of it.

    I reckon most LL  should be satisfied  with 3 unencumbered  rental properties and 1 residential and possibly FHL.

    It really has become pointless being a leveraged LL  with S24.

    LL  should be looking at downsizing  their business NOT being on the lookout  for the next blinding deal.

    I appreciate  the temptation if you have lots of offset savings

    Disregard  it for investment purposes.

    You are addicted!!

    It is only natural to express your capabilities if you have created the resources to do do.

    You need to resist the temptation

    Perhaps an offset  account puts too much temptation in your way.

    I appreciate is hard to keep a successful business person down but you will have to fight with yourself to allow those deals you spot to pass you by..

    Easy to say I know and for you it will be a struggle to avoid the temptation  of that deal you have spotted

    Perhaps time to devote your energies to more selfish pursuits!!

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    Hi Paul. Whoever said the next blinding deal would be anything to do with property?!

    There's loads of deals out there every single day, not necessarily in property. In the SE I don't think there are any real deals out there at the moment, just mountains of debt pressure.

    Each £500 I pay off I get closer to my goal.

    And yes, I agree with you completely when you say a few properties plus a PPR - I don't see why does anyone need any more if they're cash-flowing well?

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    I've paid off one (most expensive) & will pay off another (next expensive) later this year, after expiry of redemption fees.


    The rest run till I'm 80, interest only.  Currently ludicrously cheap, floating rates, - we'll see what happens to BoE rates.  I plan to leave them there.  When I get to 80 I may be...

    a) Dead & gone... kids problem

    b) Unaware of anything, - the variety of demented - so not my problem...

    c) Still compos mentis: If so I'll figure out the next best step then...

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    I plan to sell my most expensive property, my former home in Reading in 2019.  It has my largest mortgage . Using what is left over I will pay off/down some of my other mortgages in my own name.

    In 2019 I will start drawing on my pensions so would likely move abve the HRT threshold due to S24. Selling my former home which has my highest rent will counter most of that. It has a low return so paying off the other mortgages will probably increase my net income by more than I lose. I may use the tax free lump sum from my pensions to pay off the rest of the mortgages in my own name, so that I will only pay 40% on net income. That may not be the best way to grow my business or maximize my income, but it will give me security.

    As for the mortgages for the properties in my company, my hope is that  when the mortgages need to be paid back I can seem some properties and use the proceeds to pay off the rest. but that is a while off.

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