Overpay mortgage or save for rental property

[CM97]

53 years old, single mum and finally in position of being able to save some money each month.

Mortgage has 12 years left - I could make over payments which would shorten the term down to 5 years.

Or I could save the money and use it to purchase a buy to let property to give me an income for retirement.

Any advice? Or is there a third option I haven't thought about?

Being a small-time landlord has got a lot more difficult in recent years. You often don't make much money from it unless you have a high enough volume of properties that you can make significant bulk savings due to being able to sign up for larger contracts.

If you can find a reasonably low risk investment opportunity with guaranteed ROI higher than your mortgage rate then do that. If not then overpay.

The RoI for BTL is abysmal in most places now - most of the tax breaks have been removed, BTL mortgage rates are high, and there are (rightly) a lot more management and maintenance requirements that eat into profits.

You'd probably do better sticking the money nto a pension - where you do get a lovely big chunk of tax relief.

I would pay off the mortgage. Shedding 7 years off the mortgage term will save you a heap of interest. With mortgage rates as high as they currently are, the sooner you clear it off, the better.

A buy-to-let sounds good in theory but it's no longer as lucrative as it once was. With mortgage rates so high, unless you're buying a rental property outright in cash, I wouldn't bother with it. Also, the headaches that you will have from potential tenants, breakdowns etc. It's not as passive as you may think it is.

Really, I would say it is more an argument of whether you should pay off your mortgage or invest it into some stocks/shares/pensions. For peace of mind though, I'd pay off the mortgage. The more you pay off, the less affected you will be if mortgage rates do stay high or increase.