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  • FIRST POST
    • wonderlondoner
    • By wonderlondoner 28th Nov 17, 10:03 PM
    • 2Posts
    • 0Thanks
    wonderlondoner
    Overpay mortgage, Invest or staircase
    • #1
    • 28th Nov 17, 10:03 PM
    Overpay mortgage, Invest or staircase 28th Nov 17 at 10:03 PM
    Hi All,

    I am look for opinions on how to proceed financially.

    I have a 30% shared ownership flat in London. The LTV on my share is just below 60%.

    Due to a pay rise I am be able to staircase to 50%. I currently overpay the mortgage on my share by £300-£400 each month. The mortgage on the additional share would be roughly half this amount.

    My overall goal is to either eventually staircase to 100% ownership or save a sufficient amount via other means to use the equity from my shared ownership flat to buy on the open market.

    I believe my options are as follows:

    Option 1
    - staircase to 50% and continue to overpay the original mortgage with a view to pay that off within the next 8-10 years. Once both mortgages are paid down significantly, staircase to 100%. This option would result in limited funds being dedicated to investments/pension.

    Option 2
    - Staircase to 50% and continue to overpay the original mortgage at a reduced rate. Split the remaining funds into cash, to build up a second deposit and investments.

    I am concerned that the majority of my money, both current and future money would be locked up in the flat with option 1. I see my flat as a home, as opposed to an investment. However, being mortgage free as soon as possible is my goal.

    On the other hand, by not staircasing I may be stuck in a perpetual mortgage/rent situation of shared ownership for a very long time.

    A bit about me

    Early 30s
    Single, no dependents
    Basic rate tax payer (although my next role should put me above this threshold)
    80% of my 'wealth' is equity in my flat
    10% is in a S&Ss ISA
    3% is in my company pension (I pay in 4% as this is the maximum company match. I have only been paying into a pension for a few months as I was previously concentrating on saving a deposit)
    The remaining 7% is an emergency fund in cash


    Thanks in advance
Page 1
    • BananaRepublic
    • By BananaRepublic 28th Nov 17, 10:09 PM
    • 921 Posts
    • 663 Thanks
    BananaRepublic
    • #2
    • 28th Nov 17, 10:09 PM
    • #2
    • 28th Nov 17, 10:09 PM
    What does staircase mean? Ah, Google says it means buying a greater share in the flat.
    • chockydavid1983
    • By chockydavid1983 28th Nov 17, 10:40 PM
    • 480 Posts
    • 287 Thanks
    chockydavid1983
    • #3
    • 28th Nov 17, 10:40 PM
    • #3
    • 28th Nov 17, 10:40 PM
    Are you able to staircase whenever you want?
    What is your mortgage rate?
    I'd be tempted to go with option 2. It's usually better in the long run financially to invest rather than overpay mortgage but psychologically some people like the feeling of being mortgage free.
    • wonderlondoner
    • By wonderlondoner 28th Nov 17, 11:38 PM
    • 2 Posts
    • 0 Thanks
    wonderlondoner
    • #4
    • 28th Nov 17, 11:38 PM
    • #4
    • 28th Nov 17, 11:38 PM
    Thank you for the reply.

    I agree regarding investing over the long term.

    I can staircase whenever, up to a maximum of 3 times.

    My mortgage rate is 2.09% and my S&S have averaged 30% over the last 3 years.

    My concern with delaying staircasing is that additional shares will be valued at the current market rate. If house prices increase the value of the shares increase.

    Hence, wanting to staircase to at least 50% now as the % is still attractive to future buyers and I lock in more shares now should prices increase.
    • chockydavid1983
    • By chockydavid1983 28th Nov 17, 11:51 PM
    • 480 Posts
    • 287 Thanks
    chockydavid1983
    • #5
    • 28th Nov 17, 11:51 PM
    • #5
    • 28th Nov 17, 11:51 PM
    Ah yes, I hadn't thought about later staircasing meaning buying the share at the value at that time. In that case it may be better to staircase ASAP to 100% and then immediately stop overpayments and concentrate on S&S ISA/ pensions.
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