Out of work - What do I do with my mortgages?

T

Tank

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I currently have two properties. One, my own house worth 520K with a repayment mortgage with 245K left on it. The second, is my previous house, which wont sell at the moment and is worth just under 400K with 255K left on it (Interest only thank God). We have had to rent this out to cover its cost, which the rental currently does, and some. I just lost my job and both myself and my partner are on job seekers allowance. I have 130K in the bank and am at a critical position to make a decision.

What should I do with the 130K?

Pay part of the current mortgage?
Put on deposit?
Buy another property and rent!

My concern is that for health reasons, I wont be working for at least 3 months now and want to make a decision that secures my family in the long term.

Thanks in advance
 
Tank said:
The second, is my previous house, which wont sell at the moment
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Maybe your asking price is too high?
We have had to rent this out to cover its cost, which the rental currently does, and some.
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After all tax and (allowable) expenses are accounted for?
I just lost my job and both myself and my partner are on job seekers allowance. I have 130K in the bank and am at a critical position to make a decision.

What should I do with the 130K?

Pay part of the current mortgage?
Put on deposit?
Buy another property and rent!
Click to expand...
Well almost certainly not the last option I would have said!
 
Clubman, thanks.
The house was worth 500K, and they are now going for under 400K in the area, which kills me! Even the ones at 380K are not selling at the moment. To be honest, I would not sell at those prices at the moment, as I believe that they will settle at some stage!
 
Clubman,
Rental is 1625, interest only is 1075, and we spent 30K renovating, so I suspect that the existing house covers itself... I will hold onto it, if it is a good idea, which the figures suggest.
 
If the rental property is more than covering it's costs I'd keep it, and I'd reduce the mortgage on your current home, and you immediately have lower outgoings, that's if the deposit interest you would receive is more than the interest you pay. You have to do the sums. There is no point reducing the mortgage on the rental property as there is more tax relief on this.
 
You've put in some more figures since I wrote - what are you planning on doing to repay the capital on the rental property? Are you putting the extra 500 to pay for day to day expenses or are you saving it?
 
Agree with Bronte.

Use 100k of deposit account to reduce your own mortage repayments. Re-negotiate with the bank to pay the final 155k over a longer term. Think about fixing for a year even. When circumstances improve, you can always pay more of it off etc.

Keep 30k for emergency funds etc
 
Bronte, Thanks. Before I pay off the mortgage, I want to exhaust all avenues, as I am sure that once I give the bank the money, with my current situation, I will be unable to get a top up, or funds for setting up business next year. IE, they wont give it back!

Clubman, we have a seperate account for the house incoming and outgoing, and track the costs. There are a few euros extra every month in it and we track costs, so I am quiet sure that it is generating a small income. With no job, I have a lot more time on my hands now, so I could probably do a full analysis on it!!!!

Red, Good idea, which we factored in. We have another 25K aside to live for the next 6 months, as we will certainly need it.
 
You're taking in more in rent than your interest on the rental property. What provisions have you made for your tax liabilities?
 
We renovated the house, and have costs relating to renting it each year. Insurance, furniture etc I understand that you can write some of this off the costs (Would appreciate advise on this if anybody knows the ins and outs). The contract is under my partners name, who has not worked this year. We are expecting some tax liability on it, but not much.
 
If the rental property is not a strain let it be.
Put your savings in a high interest account (or accounts) and drawdown a monthly amount to cover the mortgage repayments on your primary residence whilst you're out of work.
You might be better off taking what you can get for the rental property but the easiest thing to do for the next coupl of years is keep things as they are and live off your savings whilst out of work.
 
DerKaiser, Would paying off the mortgage on my primary residence not save me more than a high interest account? This is where I am stuck. I am also fearful that putting money into a savings account is no longer 'safe'...
 
Sell investment property for 370-380k
use 125k profit along with your savings to pay off your PPR mortgage completely
you are now mortgage-free! with an asset worth 520k - this is killing most of the risk and putting you in a very favourable position should you ever want another loan.
 
If u look at things from 2 perspectives the solution becomes a lot clearer;
1) Your rent on investment property exceeds the Interest portion of the mortgage- thus its paying for itself
2) The tax u pay on rental income is on the rental income – interest portion of mortgage=1625-1075=550-liable for tax (less capital allowances on furniture & repairs etc for the rental property)

So, if it was me I would definitely reduce the mortgage on your PPR by at least 100k, I would also even consider releasing another 25-50k from your investment property and use that to further reduce your PPR’s mortgage just to ensure the mortgage on the PPR is as manageable as possible.
 
Bamboozle, that is an excellent idea, and one I didn't think about. Releasing from the investment property would certainly, in the short term, make life easier for us. I think that I need to run through that idea tonight. Thanks very much.
 
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