Sell BTL and become mortgage free?

Hi all, would love to hear your thoughts on this.

I have 2 properties. 1 is a BTL that I originally lived in and for the past 2 years have rented it out. There’s 14 years left on the mortgage. I owe around £120k and the current mortgage is 4.7% repayment and ends Sep 2029. I’ve just enquired with the bank to switch it to an interest only mortgage and by doing that they had to do a valuation as it hasn’t been valued by my bank for a few years. They’ve valued it at £550,000 meaning if I sold it I’d have £430k (then minus fees and CGT). This was quite the surprise to me and made my wife and I start to ponder..

My residential mortgage has 24 years remaining, I owe around £290,000 and the rate is 5.7% and ends in 2026.

I’m very tempted to sell my BTL and become mortgage free but would like a second opinion. My goal is to try and quit work in the next 5-10 years and just do the odd bit of work every now and then. Ideally build an investment portfolio that I can live off the dividends.

My current salary is £105k and I get about £10k bonus a year (plus equity in the company I work for).

My BTL gets £2,000 a month from rent and then after the mortgage and other costs I end up with about £800 month play money (I usually use this as an overpayment on my residential mortgage).

We have an emergency fund of about £30k.

My pension is around £150k (currently putting in £30k a year to be eligible for childcare benefits).

I also have investments of around £90k. To which I add a minimum of £250 each month.

The rest of my money pretty much then pays all my bills. And until our child finishes nursery (next year) and our car loan is paid off (sep 2027) I can contribute any more really.

So my options are (and would love some input):

1 - leave things as is 2 - sell the BTL, invest it all into a portfolio (transfer £20k each year to my wife and my ISA with the plan to quit work and live off dividends in x years) 3 - sell the BTL, pay off my residential mortgage and invest the remaining and add to that with my now available cash as bills will be pretty low

It’s also worth noting the longer I delay selling the BTL, unless property prices soar the capital gains starts to really creep up each year and my tenants are extremely good so I have no ambition to raise rent until I need to find new ones.

Also my wife works part time as she juggles childcare and her job is self employed and pretty much makes wage job, which she enjoys and makes her happy so I’m not fussed about her earning lots. The money she makes is basically her spending money. But we both are aware that when our child starts school she’ll probably want to do something more, like start her own business.

If you were me, what would you do?

Thanks!