I know you can help me

Hopeful2

I have read the threads and have got a bit confused so would welcome your input regarding overpayment.
I owe £48,000 on my mortgage which is now at a rate of 3.85% flexible. I
My monthly payment is £293 and I can overpay as much as I like and have been doing £600 per month.
I am a basic tax payer and have an ISA.
I may wish to borrow some more in the future for home move or repairs.
Should I overpay or save - if saving what interest rate would I need to earn?
I am 51 this year. Would like to be mortgage free but is it worth it if rates are going to be very low and would it then be better to move to a bigger house (only have 2 bed terrace)?
Thank you so very much. If you have any more time to assist -

My son is saving for a house he is 27 - no pension. He has around £30,000 saved towards it. Would it be a good idea for me to get my own mortgage down and perhaps get something on my equity to help him.

As a single parent do not know what is the best to do to help him or for me to be able to manage ok in the future. All help appreciated.

Trying_to_be_good

That's a lot of quesitons in one go!

I assume by 'I have an ISA' you have a cash ISA and have contributed the full £3,600 this tax year? Do you have £3,600 ready for 6 April next year? That would be my first suggestion.

A mortgage interest rate of 3.85% would mean you need a savings interest rate of 4.82% in a taxed savings account to get better value. This can be done, but make sure if you're checking rates you're comparing you January mortgage rate with January savings rates - most banks/building societies will lower rates on accounts from 1 Jan.

Another factor is whether you can withdraw overpayments made on the mortgage - if so, this would give you back the cash to use for home improvements/lending to your son. Whether you can take the exisitng mortgage to a new property will depend on whether it's a 'portable' mortgage and whether you meet the terms and conditions of the lender at the time of any move.

Why do you want to move home? It's likely all your outgoings would go up, not just mortgage, so you need to factor this into any decision.

As for your son, he's doing the right thing savings now for a substantial deposit. You could draw down on your equity (the value of your home that you own, existing mortage if allowed, or a remortgage) to give/lend him.

Whether he will get a mortgage will depend on his circumstances.

Hope this sheds some light!

Hopeful2

Many thanks for the quick response and my apologies for the question being so long. I have always wanted a larger home but not a necessity I guess I should stay put. Also my friends say they are going to downsize later to release money for living on later so wondered about that side of it but guess savings will help me if I am without a mortgage. I would really love to have minimum outlay and travel and give up full time work - well I guess a lot of us have the same thoughts - just need the cash to do so. Again, thanks.

EssexHebridean

Good luck with your decisions Hopeful. Personally I feel that getting rid of the mortgage ASAP is a really positive target. Although not really "bad" debt, it IS still a debt and thus you are better off without it. I assume that you don't have any other debts (credit cards etc) that you need to get shifted? If you do, then as ever those should be your first priority.

Another thing you might give some thought to is making sure that your cash is working as well as possible for you - if you're on economy 7 electric use as much as possible on the cheap rate, use cashback credit cards where possible and always pay off the balance in full each month, get the best value possible from any supermarket loyalty schemes you are a member of (Tesco clubcard points are better spent on "Deals" than on shopping, for example) and that sort of thing.

Regarding the idea of moving - you say you want a larger house but do you also want increased bills, more cleaning etc? I wonder whether you are considering the idea of a move because you actually want to leave where you are and move on, or whether we are conditioned by society to always feel that we should aspire to move up to the next level? If you like where you are, and don't actually need additional space, then why put yourself through the stress and hassle of a move?

Hopeful2

Thankyou. I do have some outstanding debt on 0% (5,000) which you have helpfully reminded me I should cover before I continue to overpay. Up until now I have been swapping around and last time paid a 3 per cent fee so now would be better to pay it off I should think.
Moving, I think it is about having something bigger to put all my junk but yes this is an area I should also be sorting out.

EssexHebridean

LOL - you need the Old Style board's decluttering thread then!

StuartGMC

EssexHebridean wrote: »

If you like where you are, and don't actually need additional space, then why put yourself through the stress and hassle of a move?

Very true, plus the additional costs for the move, mortgage fee etc.
A larger home will mean you then have to keep working to fund the larger mortgage, removing the option to down-shift/retire early. Also, your pension will then need to cover increased council tax, larger heating bills, potentially more maintenance, increased insurance etc.... these will be ongoing costs every year.

I think as EH has indicated, unless you have a strong need to move, then I would stay put, clear the mortgage rapidly so you then have a choice in what you do about working or not.

Your son sounds like he has worked hard to save that deposit, and it should mean he can proceed without putting you into hardship at a time when ideally you want to be debt-free. If you save up, then if he needs some help later, you can offer it without having to fund a mortgage to do so.
Good luck in your decisions.

temba

If you think you may need the cash in the medium term (either for home improvements/lend to son/pay off 0%) then don't overpay on your mortgage, put it into savings. If you wanted to "borrow" it back off the mortgage, you may end up paying a fee to do so even if you have overpaid(my mortgage lender charges £250 I think) and that would just be a waste of money. Keep your money in cash, especially it is possible to get saving rates which match or even better mortgage rates (as explained by Trying to Be Good)

Of course, your mortgage might be different and have no fees to borrow more funds, but I'd keep it in a savings account in your situation, and overpay when you are sure you aren't going to need the cash.