Should I invest or overpay my mortgage?

(This is not financial advice)

With interest rates now higher than before a dilemma many investors have is should I pay my mortgages down or continue investing, some points to consider are:

If I invest can I make a potential higher return than my current interest rate? Remember to factor in all your costs.  Another factor that needs careful consideration is capital growth as you can’t predict what will happen in the future!

Can you overpay your mortgage?

Most lenders do allow you to make overpayments of 10%  every year but not all will offer this overpayment.

Which mortgages are most tax efficient to pay down?

How you are taxed on personal name vs ltd company mortgages differs, so I recommend getting some advice.

Is it worth paying down a mortgage to be eligible for a lower LTV product?  Many lenders offer better products at lower LTV’s like 60% but not all!

Once you have overpaid the mortgage it isn’t that straightforward to take it out again.  It’s not as simple as refunding the overpayments to you, the lender may not allow advances and if they do it involves a full underwrite again like the initial mortgage application.  If you would like to overpay and have the flexibility of taking out the money again an offset mortgage is worth looking at.

Why you might want to invest:

With the market being slower than the last couple of years can you take advantage of less buyers pushing up the price.  We are seeing many investors now buying properties around home report or lower compared to previously.

Rental demand is through the roof in the majority of Scotland and rents have increased significantly in most areas helping offset higher mortgage payments, best to speak to a local letting agent to get a better insight.

Potential capital appreciation, with inflation so high having money sitting in cash is losing value over time.  If an asset increases in value at the same rate or more than inflation then you are preserving your capital.

As you can see, lots to think about, if you have any questions please do not hesitate to get in touch.