Author Topic: Pay off mortgage or buy another property?  (Read 1115 times)

seanricekl

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Pay off mortgage or buy another property?
« on: April 23, 2017, 08:03:39 PM »
Hello. Apologies for this being long winded!

What should we do - pay down mortgage or buy another property? I like the idea of owing nothing on our house, but my wife thinks we should buy another property.

Here's our situation:
We live overseas (in Malaysia)
We have a one bedroom flat in the UK that is mortgage free and rented. It is in a great location and has always been rented (except for 1 month here and there) for the last 20 years. The original purchase price was GBP 54000 and it now has a value of ~ GBP 200000.
We also have a 3-bedroom house that is also rented. It is also in a great location and we had no trouble renting it at all.
Original purchase price was GBP250000. We still owe GBP 140000 on this property with 22 years remaining on the mortgage. Its market value is ~ GBP315000.

We live in Malaysia and our employer pays us a housing allowance that we are currently using to rent a house.

We have an investment that will mature soon. It's around GBP 80000. We could pay that down on the mortgage of the house and use the money that we were paying into the investment monthly to make extra mortgage payments. Doing this, we could pay off the entire mortgage in 3-4 years, saving ~ GBP 80000 in interest.

The other possibility is to use the money to buy a property here in Malaysia and use our housing allowance to pay the mortgage monthly. We will definitely be in Malaysia for the next 5 years at least, so our employer would be paying the mortgage for us. As we would be the tenants, we wouldn't need to worry about the property being vacant. When we leave Malaysia, we could then either sell the property or rent it to other employees in our company.

What would other people do in this situation? I feel like continuing to rent is just throwing money away. But I also like the idea of having 2 properties in the UK mortgage free.
We have had our fingers burned with the stock market in the past, so we are reluctant to go down that road again.

Thanks,
Sean

waltworks

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Re: Pay off mortgage or buy another property?
« Reply #1 on: April 23, 2017, 08:38:11 PM »
What does the rest of your financial situation look like? I would NOT want to have most of my NW tied up in 2 pieces of property. If you have a lot of other assets in other things (stocks, bonds, etc) then you should run numbers based on interest rates and your anticipated housing costs in Malaysia. If you don't have much in other investments, don't put any more money into RE right now (ie, don't pay down your mortgage or buy a house in Malaysia).

-W

SwordGuy

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Re: Pay off mortgage or buy another property?
« Reply #2 on: April 23, 2017, 08:44:02 PM »
What kind of financial reserves do you have? 

Stability of the job(s)?

Stability of the country you're in?

Restrictions on foreigners owning property?    Likelihood of killing all the foreigners or just confiscating their property?    (This does happen from time to time, and rarely with zero warning signs.)

What's the interest rate on the mortgage you want to pay off?  Fixed rate for the whole loan term?  Or do rates get changed periodically? Pre-payment penalty?

Do you know why you got burned in the stock market?   Do you know how not to get burned?   Have you read JL Collin's stock series articles?    They will give you the knowledge of how to do stock/bond investing the right way.


seanricekl

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Re: Pay off mortgage or buy another property?
« Reply #3 on: April 24, 2017, 04:47:47 AM »
My wife and I are both employed in stable jobs. Malaysia is a stable country - I have no concerns about investing in real estate in the country.

We have an offshore pension fund valued at around GBP 100000. We have been overseas since 1997, so we don't have state pensions in the UK or Canada (I'm Canadian, my wife is British.)
Apart from the mortgage on our second house, we have no debt - no credit cards/car loans/personal loans etc.
We pay into an Employee provident fund here in Malaysia. Our employer pays in the equivalent of 12% of our salary into the fund and we currently pay in 8%. We can increase our contributions up to a maximum of 15%. The fund provides returns of about 6%.
We have some savings in an account in the UK, but not a whole lot.

Regarding getting burned with investing before, we sold a property that we had in Thailand. Our financial advisor convinced us to invest the money in 2 different funds. One of them absolutely tanked and we lost 96% of the money we invested and the other one suspended trading and it took us 6 years to get the money that we invested back out - with little gain.



seanricekl

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Re: Pay off mortgage or buy another property?
« Reply #4 on: April 24, 2017, 04:50:05 AM »
Also - there are no restrictions on ownership other than a minimum price for foreigners.

The mortgage on our second property is 5.49% fixed. No early payment penalties.

Thanks,
Sean