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  • FIRST POST
    • acerazor1
    • By acerazor1 7th Jul 17, 8:14 AM
    • 37Posts
    • 9Thanks
    acerazor1
    Just bought a house!!
    • #1
    • 7th Jul 17, 8:14 AM
    Just bought a house!! 7th Jul 17 at 8:14 AM
    So me and my partner have just bought our first house
    I'm looking for advice on our best way to repay the mortgage.

    The house was bought for £248,000. I'm 26 and shes 24 next month, we went in totally 50/50. We have used the help to buy equity loan, (around 18%) £44,000. The mortgage is a 5 year fix at 2.57%, 30 years, for £168,000. Our deposit was just under £35,000.

    We would like to pay off the equity loan in 5 years (maybe 6 depending on interest rates). We plan on remortgaging in 5 years to raise some of the cash. We are currently both putting £200 each into a savings account (2% interest rate) each month towards paying back the equity loan. Would we be better off paying off the mortgage early with this money, giving us more equity when it comes to remortgaging or should we keep saving as cash? Partner currently has around £6,000 saved, I currently have only around £500.

    Edit: Worth noting we can overpay on our mortgage upto 10% per year without fees.
Page 1
    • CathT
    • By CathT 7th Jul 17, 9:17 AM
    • 5,283 Posts
    • 36,314 Thanks
    CathT
    • #2
    • 7th Jul 17, 9:17 AM
    • #2
    • 7th Jul 17, 9:17 AM
    Hi and congratulations. Sounds like you have a really sensible approach to your finances and mortgage freedom journey.

    I'd be tempted to focus on the equity loan, have you done some projections to see how much you could have saved in 5-6 years?

    There are some better regular saver accounts out there too, FD do a 6% one and I think M*S do a 5% one. There are also others and it might just help you to maximise your savings.

    I'm sure someone with better knowledge will be along soon with suggestions aswell.
    August 2017 -
    part 1 - £79,967
    part 2 - £46,351
    Total - £126,318
    • Lokolo
    • By Lokolo 7th Jul 17, 9:36 AM
    • 19,740 Posts
    • 14,746 Thanks
    Lokolo
    • #3
    • 7th Jul 17, 9:36 AM
    • #3
    • 7th Jul 17, 9:36 AM
    If you are looking at remortgaging to release equity after 5 years you would be better off overpaying the mortgage (assuming no early repayment charges, usually you get 10% free on a fix).

    You would save more money by paying debit at 2.57% than saving at 2%.

    You should
    - Make an emergency savings plan with the £200 a month until you have 3-6 months income
    - Use regular savers for 3%+ interest
    - Overpay mortgage when you can't get savings rates of above 2.67%
    • acerazor1
    • By acerazor1 7th Jul 17, 9:36 AM
    • 37 Posts
    • 9 Thanks
    acerazor1
    • #4
    • 7th Jul 17, 9:36 AM
    • #4
    • 7th Jul 17, 9:36 AM
    Hi and congratulations. Sounds like you have a really sensible approach to your finances and mortgage freedom journey.

    I'd be tempted to focus on the equity loan, have you done some projections to see how much you could have saved in 5-6 years?

    There are some better regular saver accounts out there too, FD do a 6% one and I think M*S do a 5% one. There are also others and it might just help you to maximise your savings.

    I'm sure someone with better knowledge will be along soon with suggestions aswell.
    Originally posted by CathT
    Thanks CathT!

    We plan on having £24000 saved as cash in 5 years time (£400 a month). I have not included the savings we currently have as we both are expecting to need a change of vehicle/decorating costs.

    I'm not 100% clued up on how paying off your mortgage early affects your interest, so I'm not sure if we would be better paying off the mortgage early, or putting the money into an account like the two you have suggested (thanks for that! didn't realise you could get saving accounts with interest that high atm).
    • acerazor1
    • By acerazor1 7th Jul 17, 9:42 AM
    • 37 Posts
    • 9 Thanks
    acerazor1
    • #5
    • 7th Jul 17, 9:42 AM
    • #5
    • 7th Jul 17, 9:42 AM
    If you are looking at remortgaging to release equity after 5 years you would be better off overpaying the mortgage (assuming no early repayment charges, usually you get 10% free on a fix).

    You would save more money by paying debit at 2.57% than saving at 2%.

    You should
    - Make an emergency savings plan with the £200 a month until you have 3-6 months income
    - Use regular savers for 3%+ interest
    - Overpay mortgage when you can't get savings rates of above 2.67%
    Originally posted by Lokolo
    Thanks Lokolo, I think that answers my question perfectly. I think I will put away £200 a month into an easy access account for emergency's until I have an adequate amount. Then put the rest into a higher interest savings account, which I will search for online using a comparison site. If the interest rates from the savings account every drops below the mortgage rate, then I'd be better off paying off the mortgage early.

    All understood - thanks for all the help guys! Its feels good to have a clear plan!
    • Mojisola
    • By Mojisola 7th Jul 17, 9:55 AM
    • 28,201 Posts
    • 71,711 Thanks
    Mojisola
    • #6
    • 7th Jul 17, 9:55 AM
    • #6
    • 7th Jul 17, 9:55 AM
    So me and my partner have just bought our first house
    Originally posted by acerazor1
    Congratulations!

    Not about the money but - how do you own the house - as 'joint tenants' or 'tenant in common'?

    If it's as TIC, do you have wills leaving your share to each other or would someone else inherit the 50% owned by the deceased?
    • Kittenkirst
    • By Kittenkirst 7th Jul 17, 6:42 PM
    • 1,570 Posts
    • 8,059 Thanks
    Kittenkirst
    • #7
    • 7th Jul 17, 6:42 PM
    • #7
    • 7th Jul 17, 6:42 PM
    Congratulations acerazor! Sounds like you have a good solid plan
    2017 MFW #20 - OP £1884.86/ £2150. 87.6%
    Last 3 months- Jul £172.36 Aug: £212.52 Sep £132.24

    Emergency fund £3725]/£6k
    Mortgage Oct '16 £170.995 LTV 90% end: Nov 2041
    2016 OPs £255.50/£150
    • DeterminedSingleMummy
    • By DeterminedSingleMummy 7th Jul 17, 7:18 PM
    • 191 Posts
    • 854 Thanks
    DeterminedSingleMummy
    • #8
    • 7th Jul 17, 7:18 PM
    • #8
    • 7th Jul 17, 7:18 PM
    Congrats!! Have a play around with the mortgage overpayment calculator and read Martin's page about mortgage overpayments. It'll give you base knowledge to decide what is best for you to do. I revisit the overpayment calc whenever my situation changes. Also reading everyone else's diary helped me loads good luck!
    Balance at start of mortgage Dec 2011 £87500
    1 Jan 2015 = £73,735 Overpayments = £3,360 (average £280 p/m)
    1 Jan 2016 = £66,558 Overpayments = £4,770 (average £397.50 p/m)
    1 Jan 2017 = £57,756 Overpayments so far Jan £0 Feb £550 Mar £3022 April £690 May £1513 total £5775
    • Koldweather1
    • By Koldweather1 7th Jul 17, 8:31 PM
    • 21 Posts
    • 36 Thanks
    Koldweather1
    • #9
    • 7th Jul 17, 8:31 PM
    • #9
    • 7th Jul 17, 8:31 PM
    Congrats, you are of a similar age (I'm 27) and with a fairly similar size loan (though I did get some help from parents with deposit) so I'll be watching this very closely!
    • acerazor1
    • By acerazor1 10th Jul 17, 11:50 AM
    • 37 Posts
    • 9 Thanks
    acerazor1
    Thanks everyone!

    @Mojisola We are joint tennants I believe, but i will certainly double check this!
    I've signed up for an M&S current account so I can access the 5% savings

    I'm still a little confused when it comes to saving vs overpayments. When I put the numbers into the overpayment calculator, in 1 year of £200 a month overpayments it says there is approx a £2500 saving. M&S will give me 5% of the £2400 (also £200 a month) which = £120.

    So if I'm looking at this correctly, I'd be better off overpaying the mortgage at 2.57% interest vs 5% interest in the savings account?

    I'm sure I'm getting this wrong so If anyone could clarify i'd be very grateful

    Btw, I think i'm going to start a blog on here as many of you have. I think that will help keep me focused.

    Edit: Forget that question, just worked out where I'm miscalculating - by forgetting the £2400 of overpayments hahaha!! Must be a monday...
    Last edited by acerazor1; 10-07-2017 at 12:00 PM.
    • Welshlassie
    • By Welshlassie 11th Jul 17, 1:58 PM
    • 1,716 Posts
    • 2,969 Thanks
    Welshlassie
    Also you want to bare in mind that regular saving account effectively only pay half the interest rate advertised because you don't have the total amount in there the whole time £200 per month would generate £60 pa in interest.

    Congratulations on your house purchase and the start of your MFW journey. Sounds like you've got your head screwed on and will make great progress.
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