It is not unusual for a couple to have both their own residential property and also a buy-to-let property and to have an outstanding mortgage on one or both properties.
This was certainly the case with a couple I met this week who quite successfully had purchased and let out a flat with an interest only mortgage.
Successful because despite the recent market for residential property they had seen it grow in value and were fortunate enough to have had a good period of occupancy by tenants the rental income from which had comfortably covered the mortgage interest costs.
At the current time the interest rate on their “tracker” mortgage was less than one and a half percent. Their question to me was should they take some their cash savings and pay off part of the outstanding mortgage?
Whilst they were currently earning more interest on their cash savings than they were paying on their mortgage, they felt it would only be a matter of time before the position was reversed.
What would you do?
I have to say I hate debt. If it were me I would probably take some of my cash, remembering to keep an emergency fund or reserve of say six months expenditure, and pay off the debt.
But I might wait a while until my mortgage costs started to rise beyond the reward I got by staying in cash.
