overpay home tracker or buy to lets at svr ?

[banshee]

hi, need advice in following scenario ,

home: tracker@ecb +.85%, 275k mortgage on 450K value, 23y left.
buy to let (A): @ svr -.4% = 4.65%, 286k mortgage on 250k value, 28y left.
buy to let (B): @svr -4%= 4.65%, 182k mortgage on 23(0k value, 27y left.
top up loan on B: @3.55%, 80k, 18y left.
home is not linked to the other loans as regards security etc.

All loans joint with my wife, both public servants, at present, we are in position to overpay or restructure loans in order to pay circa an extra €700 pm. Have 30k in savings @ 1.5%. The rental incomes, plus €250 from our salaries, meet the full repayments on both buy to lets and top up loan.
We are thinking of relocating to rural ireland in next 3 years .

Should we pay off home loan quicker or put extra cash and savings, towards more expensive buy let mortgages/top up loan (loss making atm, plus usual wear and tear, furniture/fittings replacement costs etc, expenses). My wife believes our home loan should be paid off first but I believe the more expensive loans should be first, as if interest rates go up we may be find it difficult to service these loans.

All thoughts / comments welcome . Thanks.

 

[Joe_90]

To assess the cost of each you need to take off the tax deduction that you get so 4.65% is really costing you around 2.9%. So from a pure financial view point this is more expensive so you should be paying it off faster.

But your home is your home and I think people just want to get this loan down.

Remember you will have a tax bill to pay on the rental properties in October.

 

[Agent 47]

I would pay down the top up loan given you have alot of interest relief @75% to avail of with the rental mortgage A & B. Leave the tracker alone. Am in same position as you but without the top-up loan which does not seem to avail of interest relief (from what you disclosed). Get this down first then focus on rental mortgage B in case you run into trouble on A.

 

[banshee]

forgot to say that the top up loan was to facilitate purchase of buy to let (A), so interest relief is available.
I am leaning towards getting Loan (A) down first even though it seems like be throwing cash into a money pit but if we move we will lose our home tracker and so will need extra cash to meet any new mortgage repayments likely to be on a much higher interest rate. So dilemma is really , pay down home mortgage as much as possible before relocating so as to have greater cash reserves when sell home or, get one of other loans down as much as possible.

 

[Gerard123]

All things told, you're in a good position compared to a lot of people.

I would tend to leave the buy to let's alone, they seem generally under control. Very modest funding of 250 per month so suggest continue that. Over time the small negative equity will reverse, plus some upside potential in house values longer term.

Definitely wouldn't touch the 30k savings.

While tax on buy to let mortgage interest is a relevant matter, it's a small one here. In the short term the difference arising from the tax on interest is around 150 per year. (700pm times 12 times 4.65% times 75% restriction, all divided by 2 to average over the course of a year).

I see an important point being your thoughts around relocating in 3 years. Important to retain flexibility money wise. What about saving the 700pm times 12 times 3 years is about 25 grand. Taken with your savings of 30 gives a good fund is you need deposit for a house in the countryside.

Of course you may decide to sell your current house and that will release further equity, putting you in a stronger position. You could put the 700pm into your house tracker mortgage but that probably locks it away. If anything happened preventing a house sale in a few years, or you decided not to sell, you may not be able to access that money, not at tracker rates anyway. I see no difference financially in using the money to pay the tracker now or to save, it's either in a deposit account or in the house equity. Former gives more flexibility.

Depending on which bank could you port your tracker? Would you want to hold house for a period while you settle down in your new location?

All in all I would lean towards saving the money, be disciplined in doing it. Keeps options open and little downside to saving versus the other options on using the money.

Obviously other considerations, pensions (public sector so assume prob reasonably well prepared), age, kids etc come into play, though guessing if over 20 years of mortgages left you're in your 40s. If you were close to retirement I would probably be of the view to pay down your own house mortgage asap so that you own the roof over your head!