Owning your own home

Thanks all - daily interest! that trend makes more sense.

Now to understand why the daily rate isn't reducing at some kind of accelerated rate if I am overpaying.

Nov 17 - £527.58 / 30 = £17.59
Dec17 - £542.44 / 31 = £17.50 -9
Jan 18 - £540.37 / 31 = £17.43 -7
Feb 18 - £485.64 / 28 = £17.34 -9
Mar 18 - £535.93 / 31 = £17.29 -5

There are worked examples on quite a few financial websites. Suffice it to say I could have rented out my old flat and still purchased the house we are in now (with the use of a lot of gearing) and I am very relieved I decided not to. I wouldn't touch buy to let in London with yours personally- I would be amazed if there weren't further punitive tax raids on the way in the next few years.

I may have answered my own question, my overpayment dates are random and have been at the start, middle and end of the month depending on when I bother to work out if I should over pay that month. I think I just need to be satisfied with the interest amount reducing therefore the relative overpayment taking larger and larger chunks of the capital.

You mean not being able to deduct finance costs from profits?

Examples here:

https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

If you earn a lot and have high finance costs it might be a bit painful.

Our mortgage has an overpayment threshhold that triggers an auto-recalculation of the capital balance. Our previous monthly overpayments never triggered it. We had an option to ask, via an online 'Contact Us' page for a balance recalculation. We also had a line item on the annual mortgage statement 'Misc/adj'. Following a written request for explanation, this was explained as all the incremental reductions as the monthly balance reduced.

It’s all pretty over my head to be honest. I think I need to meet with some sort of independent advisor. I’m not after profit, just mortgage covered, and yeah higher tax bracket before any rent so prob stitch up?

the payments are going down - @dt nailed it. the day counts are different per month, and mortgage repayments tend to be calculated on an Actual/Actual daycount basis

Nov 17 - 30 days
Dec17 - 31 days
Jan 18 - 31 days
Feb 18 - 28 days
Mar 18 - 31 days

(In some cases, overpayments can be used to reduce the term of the mortgage, in which case the interest charged is constant)

[Edit] late to the party

It's worse that that; in some specific circumstances if you rent out a property it could actually end up with you subsidising the property. You really need to take a close look before you jump in.

I’m not after profit

It's strong yield* and capital appreciation** you want - two things that are hard to achieve if you are BTLing in London now.

Do you have an accountant? Who is doing your tax return?

* i.e. the profit from your cash outlay expressed in % - example you paid £100,000 for a property, cash £25,000, mortgage £75,000. You get £500 a month rent, and the mortgage costs £100 per month. There are no other costs. That leaves you with £4,800 a year which is a cracking yield before tax of around %20 (£4,800 is roughly %20 of £25,000).
** rising house prices

Argh. I don’t have an accountant yet, early days, and debating if it’s wise.

I don’t even understand what the first * means.

confuseddog.jpg

Re: term length. While a shorter term will be the likely outcome when this 5yr runs out, my main goal is suppressing the pessimism that I am not always going to be earning this much. Halifax allows payment holidays if you have overpaid and if in 4.5 years I am earning less, I could probably have afforded us lower monthly repayments for the same remaining term. Plus, there may be a mini stevo around to look after if all goes to plan.

Note: I am also saving separately.

debating if it’s wise.

Unless you are looking to diversify, it's probably not. High entry costs, low capital appreciation, poor yields.

I don’t even understand what the first * means.

See completely unrealistic example, above.

I may be wrong ( i hope not) but you can still dont pay tax on repairs and any agency fees.

So just work out assumed rent profit after those, take away 40 percent. If that doesn't cover your mortgage then you're in trouble.

Hmmm...

The overpaying on mortgages makes me wonder.

Is it better to overpay a mortgage or add extra money to a pension fund? I'm 46 btw.

you can still dont pay tax on repairs and any agency fees.

The taxable income from the property is £income - £costs except finance costs . So kinda yes.

it's a mess, frankly, and they only got away with it because people don't feel sorry for people who own more than one residential property.

I imagine everyone will be different.

My mortgage started at 95% LTV so had a pretty shit rate. After the first two years that changed to 80% according to the bank (fuckers, Zoopla had it more like 60%). So while it was slightly better, I took a 5 year fix and decided myself to overpay and save.

Really? I think it's actually a pretty decent solution.

People who are just using massive interest only mortgages they can't afford who are pushing up the property prices have to sell up, and have a few years to realise it.
Circumstantial landlords with one rental who are on repayments or very small mortgages aren't too affected.

Still doesn't stop the big residential companies, but with a Tory government we we're never going to see anyone go after them.

The overpaying on mortgages makes me wonder.

Yes - it often portrayed as being a simple win - but that doesn't take in to consideration the other things you could have invested the money in. If you do start to consider that then things get complicated however so I can see why they don't.

Is it better to overpay a mortgage or add extra money to a pension fund? I'm 46 btw.

Depends on the type of fund and the size / cost of the mortgage, and whether you are in the higher tax bracket etc etc. See - it gets complicated whereas paying down debt is simple advice that is very rarely completely wrong. Unless you have a time travel machine and you can go back to 2009 and buy Bitcoin at 50p.

who owns rights on #CircumstantialLandlords ?

I hope the new tax changes have an impact on BTL landlords, who distort the market and profit from the hard work of young Londoners who are struggling just to get by.

Also, does anyone have any advice about how to buy six flats and rent them out while living in the Bahamas or any other sunny tax haven? Asking for a friend.

you invest in Bitcoin

What's a Bitcoin?

no idea! I am just a young Londoner struggling to get by.

Paid £3.25 for a flat white the other day!

Why can't Amey just ask us himself?