To pay off or not

ncrawley · 10 October 2017 at 9:02PM

Hi all, just after a bit of advice.

5 years into a 30 year mortgage term (initial 3 year deal and currently 2 years into a new 5 year deal @ around 3% give or take).

House purchased for 95k with a 10% deposit On a Repayment basis. Currently have around 72-75k remaining.

Will shortly be in a position where this can be paid off in full and other debts (loans, credit cards etc) paid off also.

House currently valued at around 115k but I know we need to take this with a pinch of salt.

Looking to upsize spring/summer 2019. Both myself and partner are in good stable fairly high paid jobs and have had some advice so know the sort of house cost we could afford in future.

So the question is what do we do?

Do we pay the current mortgage off in full and have a whole year of saving extra cash, sell the house in a year and have the full value of the house to put down as a deposit on a new house and costs using the extra saved to do the house up and extra furniture etc?

Or do we keep the mortgage going as is, put the money away in a savings account/premium bonds for a year, save what we can on top and port the mortgage over to a new house when we are ready with a deposit from the money saved and any equity in the house?

Probably won’t be black and white and not easy to answer but just wanted some opinions as both sides of the family have advised both choices!

DeafCassette · 10 October 2017 at 9:39PM

Hi ncrawley,

Your situation is similar to mine described in this post:

forums.moneysavingexpert.com/showthread.php?t=5725521

So, I thought I'd set the ball rolling for you. Feel free to give your opinion on my post..!

I'd be really tempted to pay it off now, and save the extra cash. You would be using cash outright as a deposit, and wouldn't have the "hassle" of porting your old mortgage into a new, plus it will give you a time period of actually being mortgage free and knowing what that feels like.

But what about house prices, and your local market.. Are prices in your area expected to continue to rise? If so, you might want to back that horse and get a bit more equity out of your current property..

Of course, you'll know with hindsight which was the best option. Sorry I might not be much help, but at least these are nice problems to have. All the best!

DC