Property TV | Property Question Time – Ep 52 – Is It Worth Investing In Buy-To-Let Instead of Overpaying
Jemma Forte: So your first question is this. “Buy to let, is it worth it? As it stands, I turn 28 next month.” Lucky you. “And I have 36,000 left on my mortgage.” Lucky you.
Jemma Forte: “My salary is about 29,000 a year and I’ve had my house three years next month and have overpaid on it since I’ve had it,” very clever, “since using my 10% overpayment allowance each year. I’ve got about 12,000 in stocks and shares and a mutual fund, which I want to keep going. Instead of overpaying, am I better using that money and saving for another deposit and a buy to let?” This is obviously a very savvy person, so [crosstalk 00:01:41]
Paul Mahoney: Sounds like they’re doing quite well.
Jemma Forte: Yeah, really well, so they need some good advice.
Paul Mahoney: Well, the two aren’t mutually exclusive. He can continue to pay. I’m assuming it’s a he. It may not be.
Jemma Forte: He or she. We don’t know.
Paul Mahoney: They can continue to overpay on their mortgage and essentially still be saving for a buy to let. What I mean by that is by paying down the home loan, they can they remortgage the home loan to take funds out and use that to purchase a buy to let. So in fact, that’s probably the best way to save because the rate that he’s paying on his home loan is likely much higher than the rate he would get in the bank in a savings account. Where the buy to let is still a viable option, I’d say in the right circumstances, absolutely, however, there are more complexities involved now with all the recent changes with regards to the tax deductibility of mortgage interest, [inaudible 00:02:37] premiums and then also mortgage service ability changes with regards to buy to let. So there’s more to consider. There is a larger gap between a good investment and a bad investment. You shouldn’t just assume that all property will grow in value and that you’ll do well from it. I suppose seeking advice there is quite important, but yes. Buy to let is still very much viable.
Paul Mahoney: Yes, I believe that everybody should be saving to invest to build an investible asset base, but they don’t necessarily need to be either saving or paying off the home loan. In fact, I’d say a lot of cases, again, this isn’t specific to their situation, but in a lot of cases, you’re probably better off putting your extra cash into your home loan to then remortgage at some point to take the funds out and invest.
Jemma Forte: Excellent. Okay, thank you. I hope that helps.