PHIL and Ruth, pictured right with their children, own two properties. Their residential home has a Virgin One Account repayment mortgage with £85,000 outstanding on a variable rate of 5.6 per cent. They also have another property with a buy-to-let mortgage of £114,000 at a fixed rate of 6.3 per cent. They are worried they are paying too much and are keen to adjust the mortgages to maximise the benefit of tax allowances.
Nick Gardner, of Chase de Vere, says: Phil and Ruth are doing well in paying off their mortgages and if the ability to overpay is important, then they need a flexible mortgage. The One Account is flexible, but the rate is higher than necessary. They could switch to an excellent term tracker from Woolwich at 0.19 per cent above base for the life of the loan, giving a pay-rate of 4.94 per cent. It has no arrangement fee, no Early Repayment Charges at any time, and free legal and valuation work for remortgages. They could then overpay as much as they liked. The lower rate would save them £37.50 a month — that’s £900 over two years or £4,500 over the remaining ten years of their mortgage term.
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In addition, they are paying far too much on their buy-to-let mortgage and could fix at a much lower rate of 4.89 per cent with The Mortgage Works. This deal charges a hefty 1.5 per cent fee, but it does allow capital overpayments of up to 10 per cent of the mortgage balance each year. This would reduce their payments from £968 month to £894.99, based on a 15-year term, saving £74 a month or nearly £1,800 over the two year fixed period.
Assuming the wife pays basic-rate tax and the husband pays higher rate tax, it would make sense to put the buy-to-let property in the wife’s name. They should fill in Inland Revenue Form 17 to declare the state of ownership.
If they come to sell the property, she is allowed to give half the property back to the husband to make the most of both of their Capital Gains Tax allowances. The Revenue is generous in this regard as it effectively doubles the amount of tax relief.
Chase De Vere: 0800 358 0538.
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FANCY A MORTGAGE MAKEOVER?
E-mail: property.consumer@thetimes.co.uk with your daytime telephone number. You must be prepared to state your income and be photographed.