Possibility of Completing Mortgage in January - Advice Please!!

DeafCassette · 10 October 2017 at 9:22PM

Hi everybody,

I'd really appreciate your advice on the following scenario, and thank you in advance for your time and comments.

So, my wife owns one of our apartments, and I own the other.

Flat 1: Value: 320,000 - Mortgage left to pay: 73000
Flat 2: Value: 245,000 - Mortgage left to pay: 180,000 (purchased in 2016)

Mortgage on Flat 1 is due for renewal in January 2018, by which time, we will have saved
c. 83k. Enough to pay off the mortgage finally, and have a small buffer.

One initial idea was to move out of flat 1 and rent it out, thereby maximising the value from paying off the mortgage early, but I may stay in Flat 1 for a further 6 months to a year (for work purposes as it is quite near my office).

Mortgage on Flat 2 has fairly onerous overpayment terms (can pay a maximum of 10% of the outstanding amount, but it won't go to paying off the capital, only the interest, and monthly payments will be reduced accordingly - the term won't be reduced).

So, as the date of the final payment on Flat 1 approaches, we wonder if it makes sense paying off the mortgage on Flat 1 completely in January… I really would like to….. I think it would give me an enormous sense of relief and wellbeing knowing that we have at least one property fully paid off…but I am pragmatic to know that this might not be the most beneficial arrangement financially speaking.

Maybe it would be better to have a small mortgage on flat 1 of say 20k, but that seems like a waste of time and money really… when we could just pay it off completely..

I know I haven't given much information to go on, so please ask any questions that you think will clear things up a bit, and please comment.. Look forward to hear your thoughts and advice..

bexster1975 · 11 October 2017 at 6:59AM

Hi

There is no one answer to this. Some things I would think about in the same position....

What is the interest rate on each mortgage. It's possible they are low, if so, does paying them off make best financial sense?

Where is your £83000 now? Earning decent ( relatively!) interest? If not, try to maximise the saving.

Will reducing the LTV on mortgage 2 improve the rate you can get upon renewal?

Is £10000 enough of an emergency fund? It will likely feel not from having £83000.

Is investing some of the £83000 a financially better option?

Is being mortgage free on one mortgage a big deal psychologically? ( it is for lots of people).

Sorry to give lots of questions and no answers. I think my point is there are a range of choices. Nice position to be in however.

Good luck

Bexster

DeafCassette · 11 October 2017 at 8:30PM

Hi Bexster,

These are really valuable questions. Many thanks for your input, it is helping me to firm up my thinking about what to do next. You are right - it is a nice enough position to be in, and I am very grateful for the good fortune of the situation.

I suppose the "best" financially speaking would be to throw money onto mortgage 2 to get it bang on the 60% LTV as quickly as possible, so that means putting c. 34k onto it over the next couple of years. Fair enough.

I would love to have one property paid off in full, I just need to decide if I'm happy with that being at the expense of paying more interest on flat 2.

Well, I won't bore you further with the details. Just one question if I could bend someone's ear a bit further:

If I do remortgage on prop 1 - should I be speaking to lenders as early as now? Could I secure a deal at a particular rate now, rather than in Jan. Have not remortgaged before, so uncertain of the process.

Thank you !

katep23 · 11 October 2017 at 8:40PM

DeafCassette wrote: »

If I do remortgage on prop 1 - should I be speaking to lenders as early as now? Could I secure a deal at a particular rate now, rather than in Jan.

I spoke to London & Country this evening with a view to remortgaging on 1st February. They advised that the majority of mortgage providers will offer a deal and hold it for 3 months whilst a few will hold for 6 months so you should be fine to initiate the process now for January (depending on when in January it is).

DeafCassette · 11 October 2017 at 10:22PM

Nice one...am on the hunt now.

wishingthemortgaheaway · 11 October 2017 at 11:49PM

If you overpay by 10% on flat 2, why won't it come off the capital?
In my case interest is added on the last day of the month, on the 1st of the next month my standard payment is taken, this covers the interest added and some capital, any overpayments I make continue to reduce the balance (capital)

Have I missed something about your situation?

Wish.

DeafCassette · 12 October 2017 at 1:29PM

You're right, I was being dense and thinking that it would only pay off the mortgage, but now understand it pays off the capital. Thanks for the reminder.

Possibility of Completing Mortgage in January - Advice Please!!

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