Save/Pay off mortgage. What about Remortgage - future?

knocklyon

Hi,
I have a property with about £16.5k left of mortgage. Luckily I have savings that are above that and I could pay off the mortgage.

My query is really about: buying another property (which is why I was saving).

If I pay off this mortgage - will it be easier/more difficult to get a mortgage in the future? I ask as someone told me that its better to have a current mortgage rather than applying for a new one? Don't know.

As savings rates have fallen, would it not be sensible to pay off this mortgage with the savings?

Is it better to build up a larger deposit???

Not sure at all and would value any advice.
Many thanks

poppysarah

Why do you want to buy another property? To move into? Or BTL?

If as an investment remember not to put all your eggs in one basket.

I'd pay off the mortgage and save the amount you've been paying in an untouchable account for a long time.

knocklyon

Thanks.

I wanted to buy it as an investment but haven't decided whether I would live in it and rent my current flat out. Or vice-versa, continue living in my flat & renting house out. Most likely to move into the house (2nd property) and rent current place out.

As I probably won't buy for until next year/2011; not sure what to do about savings/mortgage. Seems banks are too risky to save in... from recent experience.

poppysarah

50k a bank and check they're all sep.

Keep saving - but pay off the mortgage now -
You might not have to worry about a second mortgage if you're a good saver.

mlz1413

If the rate you are paying on your mortgage is higher than the rate on your savings pay off the mortgage.

If you think banks are too risky you could put the money into the national bank, NSI, or just put £50k in different banks to protect the capital.

Before you buy another property go and get some professional financal advise, property will need maintaining and if you are renting there are costs to find tenants and obligations to keep property in good order and up-to-date with current legalistation plus any profit is taxable.

If are financially secure now the future will be secure too.

penguine

mlz1413 wrote: »

If the rate you are paying on your mortgage is higher than the rate on your savings pay off the mortgage.

If the rate you're paying on your mortgage is higher than the rate on your savings minus any tax you pay on the interest -- then pay off the mortgage.

You might also consider an offset mortgage if you can find one with no fees. First Direct had one a few months ago but it's now been discontinued -- however you might contact them and ask if they plan to offer it again in the future.

It's not worth switching, though, if you have to pay an arrangement fee as the amount you owe is so low.

Mutton_Geoff

Before you buy another property go and get some professional financal advise

And make sure you read Martin's Financial Advice page. I can second his recommendation to pick up a copy of the Which book "Be Your Own Financial Advisor". (Not to do any of them out of any business but to build a good understanding of how finance works before you go out there).

knocklyon

Thanks for that! Certainly food for thought.

spuds_2

We had a similar dilemma. We have a small mortgage but instead of paying it off we decided to keep up the payments because we wanted to show we had a good payment history when we applied for a bigger mortgage when we move house. I know fairly wealthy people who have had trouble getting loans because they have oaid off their mortgage, and never needed to have a credit card and therefore don't have a long credit history.

However, this is only a good idea if you are on a lowish rate. As MLZ says, if the interest on your savings is higher than your mortgage rate, probably better to pay it off. Check if there are any redemption fees - these can be punishingly high if you are trying to get out of a fixed-term deal. Good luck.

poppysarah

spuds wrote: »

We had a similar dilemma. We have a small mortgage but instead of paying it off we decided to keep up the payments because we wanted to show we had a good payment history when we applied for a bigger mortgage when we move house.
.

But pay it off and keep making the same (or higher) monthly payments into a savings account - showing you can save very well.

mlz1413

spuds wrote: »

We had a similar dilemma. We have a small mortgage but instead of paying it off we decided to keep up the payments because we wanted to show we had a good payment history when we applied for a bigger mortgage when we move house. I know fairly wealthy people who have had trouble getting loans because they have oaid off their mortgage, and never needed to have a credit card and therefore don't have a long credit history.

However, this is only a good idea if you are on a lowish rate. As MLZ says, if the interest on your savings is higher than your mortgage rate, probably better to pay it off. Check if there are any redemption fees - these can be punishingly high if you are trying to get out of a fixed-term deal. Good luck.

You could always pay off down to a really small value £100 say, that way you are not paying off so no penalties and you are making monthly payments so gives you a credit history. (Which is a good point spuds, I didn't realise such things could make a difference)