Conflicting advice to Pay down debt or not?Make Text Bigger
I’m one of the many ‘accidental landlords’ with a single property that was my primary residence until a work relocation abroad. That prompted a period of rental at the aforementioned and with emotional ties to the property now severed (i.e., no longer a home) I am in the process of withdrawing equity to purchase a number of B2L’s in Manchester to begin on my own investment journey.
It is by the by, but I have a 15-20yr view so I am not un duly perturbed by Gideon’s recent spluttering. However, I have been reading all that I can on the subject of investment strategies and to that end I have found Property118 to be a phenomenal recourse in all but one matter: To pay down debt or not.
In the Advice section the point is made a number of times that whenever the opportunity allows a property should be refinanced to withdraw equity up to a predefined amount for purposes of future investment, liquidity, or both. However, in other articles the following is written:
“The great thing about property is that over the long term it is an appreciating asset. 20 years down the line, inflation will have had a positive effect on rental income and capital values, but the loan outstanding on an interest only mortgage will remain the same as day one. In effect, inflation will have reduced the real value of the loan.”
“In my opinion, there is no sensible argument for making capital repayments on the mortgage”
Surely both strategies cannot be pursued at once? If constant refinancing occurs then the loan increases thus negating said inflation. Therefore, while I can see the wisdom in not paying down debt I am struggling to see the benefit of constant refinancing unless one is continuing to build a portfolio.
Have I misconstrued something here?
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