Should I use my pension lump sum to pay off the mortgage on my buy-to-let? DAVID HOLLINGWORTH replies

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I have a second home, a small two-bed flat, which I own with a £93,000 repayment mortgage fixed at 2.69 per cent until October 2025. 

The mortgage is set to be paid off in October 2035, and my main home is already paid off. Currently, my daughter lives in the second home rent-free. 

Once she moves out later this year, I need to consider whether to change the mortgage to buy-to-let and rent the property out. 

Early rental valuations indicate that the rent will cover the mortgage. 

I have recently retired, although I am not due to get my state pension for another seven years. 

Should I use the tax-free pot from my private pension to pay off the mortgage and use the rental amount as monthly income? What should I take into consideration?

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When does it make sense to refinance your mortgage?

Interest-Rates.Info - UK Mortgage & Property News - Birmingham Money - West Bromwich Money - Mortgage Brokers

There are a few scenarios where refinancing your mortgage could make sense: 

It will allow you to get a lower interest rate. You might refinance if doing so will allow you to lower your interest rate, either because “interest rates have dropped since you first obtained your mortgage” or “your credit score has improved since taking out your current loan,” said Bankrate. Ideally, your new rate will be “one-half to three-quarters of a percentage point lower than your current rate” to offset costs associated with refinancing.

You want to change your loan term or structure. Refinancing can also make sense if you’d like to change your loan’s term or structure. For instance, maybe you want a longer repayment term to lower your monthly payments or maybe you want a shorter term to lower the amount you’ll pay in interest. Or, maybe you “have an adjustable-rate mortgage that’s about to convert to the variable-rate period,” in which case “you could refinance to a fixed-rate loan to guarantee predictable monthly payments,” said Bankrate.

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