Mortgage Dilemma!

Hi,
Just after some wise words of wisdom although I think I already know the answer. I have been offered 2 re-mortgage products from my current lender, one of which I need to put down an £11500 lump sum which takes my LTV below 70% but my monthly interest payment is £120 lower than the second option. Therefore the question is...Would you use £11500 of savings to save £120 per month on interest OR...would you pay the higher rate of interest and keep your savings as a buffer?

I know that Martin always says "Never have debts & savings" but I know that a lot of people keep savings as a "Comfort Blanket"

Thoughts much appreciated
Paul

Comments

  • kingstreet
    kingstreet Posts: 38,688
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    If the mortgage rate is higher than the net savings rate, reduce the mortgage.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • serko
    serko Posts: 49 Forumite
    I disagree if it's tied up in the mortgage it's not an emergency fund. The way we've done it is go for an offset and using the offset account for our emergency fund.
  • Blades-man
    Blades-man Posts: 19 Forumite
    Many thanks so far, I will look into both answers. Can I tie up my savings into a higher interest rate than my mortgage and also investigate taking an offset mortgage.
  • MrMortgages
    MrMortgages Posts: 12 Forumite
    How many months savings do you currently have as a buffer, Paul?
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Blades-man
    Blades-man Posts: 19 Forumite
    Apologies, not sure what you mean by "How many months savings"?
  • kingstreet
    kingstreet Posts: 38,688
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    serko wrote: »
    I disagree if it's tied up in the mortgage it's not an emergency fund. The way we've done it is go for an offset and using the offset account for our emergency fund.
    Where does it say the £11,500 is an emergency fund?

    Must have missed it...

    Typically, an offset product will have a higher rate, resulting in the outstanding balance on which interest is charged costing more.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • Blades-man
    Blades-man Posts: 19 Forumite
    Kingstreet...I do have more savings therefore don't necessarily need the £11500 as an emergency fund (although must admit to being a tad reluctant to use my savings)!
  • Thrugelmir
    Thrugelmir Posts: 89,546
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    How much cash savings do you have? By the sounds of it even using £11,500 leaves you with some. Why do you feel the need to hold so much.
  • Blades-man
    Blades-man Posts: 19 Forumite
    Good point especially with low interest rates on savings...
  • amnblog
    amnblog Posts: 12,412
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    Are we sure your property is not worth £11,500 more than your Lender currently thinks it is?

    Leave the £11,500 in your pocket until you have spoken to a good broker.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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