When clients have surplus income or have some money that they want to put that to use, often ask us if 
they should focus on paying down their mortgage to pay this off sooner or to use that money to buy 
another property. 
 
There are benefits to both. 
 
If you overpay on your mortgage, you will minimise the amount of interest you pay on your mrotgage 
over its lifetime and will also free yourself up from paying a mortgage sooner. But investing in property 
can provide you with another source of income and an asset for life. 
 
So, what is best? 
 
There is no right or wrong answer to this as the answer is unique to each person and each situation. But 
there are a few factors to consider and calculations to make... 
 
The first being how much money do you have to use? Is it enough for a 25% deposit on a Buy to let 
property or is it a few £1,000 that could chip away at your mortgage? Is it a lump sum to use as a BTL 
deposit or is a few £100 surplus incomes each month that you could make as a regular overpayment on 
your mortgage each month? 
 
If you have a large lump sum this would allow you to invest in property, if its surplus income each month 
this would be best suited to overpaying on your mortgage. 
 
The next to consider is what interest rate are you getting on your current mortgage deal and what sort of 
return would you get on a Buy to Let property. For example, if you have a 4% interest rate on your own 
mortgage but could make a 6% return on a Buy to Let property then the answer would be to invest that 
money. 
 
Another thing to consider is this, does your lender allow for over payments, or have you already used 
your allowance of overpayments within the year? How much money do you have to invest? 
 
In an ideal world you could invest in a property that would provide you with an additional £200 positive 
cashflow per month which you could use to overpay your own mortgage. This way you have a new asset 
that would continue to pay you each month and increase in value over time and make those mortgage 
overpayments so that you would be mortgage free sooner. 
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Tagged as: Investing, Mortgages
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