Finances- what would you do?
I have accepted a new job abroad and leave in October, so will need to rent out my flat (I don’t want to sell as I just signed a new 4 year fixed rate mortgage and would have to pay a large penalty fee).
Before I had the job offer, I was planning on paying off a large loan I have with my savings this month- this would be the first time that I would be debt free (aside from my mortgage) in 12 years!
If I use all my savings to pay off my loan, then I have no back up in case the new job doesn’t work out, or I can’t rent out my flat and I need to cover the mortgage payments…
So do I pay off the loan and get rid of all the nasty interest fees, but risk not having a contingency fund…
or do I play it safe and keep hold of my savings in case anything goes wrong?
I really don’t know what to do! I’ve been waiting for years to be debt free… but if things go wrong I could be right back where I started…
Help!
PS- I am in the UK so I do not need to let the mortgage company know I am renting the place out
One other thing to add – don’t forget to inform your mortgage company that you are going to be letting out your house and also your insurance company. You MUST do this and you may find that this affects the rates on both so need to be taken into consideration.
EDIT: I know that you are in the UK hence my answer above. A standard mortgage is based upon the fact that you live in your house. If you let it out then the mortgage company has every right to change you to a different type of mortgage.
Sounds like you should play it safe: I’d keep the contingency fund. At least until you’ve got your flat rented out.
First be careful that renting out your flat does not void your mortgage agreement and your homeowner insurance.
Pay off half the loan, keeping some cash as your safety net.
First of all you need to let your Mortgage company know that you are renting out the property. They may say no….you also need additional insurance and there are tax implications. It depends of what interest your are paying on the loan. If the interest is very much above the present low rate then I would say pay it off. If not then don’t and try and invest in something with moderate risk which may bring a better return. I am sure your Bank would help you decide, they are begging for customers at the moment who wish to invest.
Congratulations, you sound very sorted!
Your last paragraph says it all. Hold onto your savings, yes you’re starting a new job but you never know what lurks around the corner to bite you in the backside.
If you’re intent on paying off debts, then depending on how much money you have, you could get rid ofthe most expensive/highest value one using a part of your savings.
Good luck
