Mortgage up for re-newal. Use or save 10k savings?

laura2481

Three years ago my boyfriend and I bought our first house together. It is a three bedroomed 'town house' (that's a new terraced house to you and I, folks!) We got a 100% interest only mortgage with the Coventary Building Society for £98k, to keep the payments down while we worked our way up the career path a little to get better payed and intending to switch to a repayment mortgage when we renewed.

In three years we have saved £10k between us. Some of this was an inheritance.

What I am wondering is: is it best to use this 10k as a 'deposit' when remortgaging, or keep it in case of something going wrong like redundency (although my boyfriend and I are in relatively stable positions and redundency's are not looking likely).

And is it best to stick with an interest only mortgage to keep repayments down until this whole thing picks up again?

Oooh why is it all so complicated?! :rolleyes:

Thrugelmir

If I was in your position.

Always have a cash fund in case of emergencies, so put some by.

See that you have other debts. Repay the highest interest debt first. Once other debts are clear then switch mortgage onto repayment basis. Or pay off lump sums on a regular basis as you've saved money up.

b0rker

laura2481 wrote: »

What I am wondering is: is it best to use this 10k as a 'deposit' when remortgaging, or keep it in case of something going wrong like redundency (although my boyfriend and I are in relatively stable positions and redundency's are not looking likely).

From your post I am assuming that your property cost you £100,000 3 years ago?

How much do you think your property will be vauled at now?

I am assuming it will roughly the same what you bought it for in 2006 after increasing in value by 10% till Septemer 2007 and now having droppped back down 10%?

So essentially you still have a £100,000 mortgage. You would be looking at dropping that to £90,000 with your £10,000.

At those figures you could secure a 90% Loan to Value mortgage.

You will not get a very good fixed rate but I suppose it depends on whether you want to look to switch to a repayment mortgage now?

Maybe you should let it switch over to the SVR and see if you can save more to get the LTV down? You must of course rememer that as you save more money your house may be worth less and less as the months go on. So you may be better fixing now at 90% and then overpaying as opposed to saving? Ther is no real need to overpay if you fix for a good term but hey with the way things are going you may find you are in NE again in 3 years!

b0rker

Oh yeah.

I never noticed your other debts there in yoru signature. Yes you should really have killed them before saving. Assuming you are paying a higher rate of interest on them than you can get on a savings account? With the poor rates of interest on savings at the moment I am almost certain that will be the case. Unless of course if you got a fixed rate a good number of months ago.

laura2481

b0rker wrote: »

Oh yeah.

I never noticed your other debts there in yoru signature. Yes you should really have killed them before saving. quote]

Thanks for your reply... 99% of the money is my boyfriends. It was an inheritance from his grandparents with strict instructions to use it towards a house... hence can't use it on my debts :rolleyes: Trust me, I would LOVE to be free of them, especially now!!
hmmm, quote not working properly. Never mind...

Thrugelmir

laura2481 wrote: »

b0rker wrote: »

Oh yeah.

I never noticed your other debts there in yoru signature. Yes you should really have killed them before saving. quote]

Thanks for your reply... 99% of the money is my boyfriends. It was an inheritance from his grandparents with strict instructions to use it towards a house... hence can't use it on my debts :rolleyes: Trust me, I would LOVE to be free of them, especially now!!
hmmm, quote not working properly. Never mind...

Then switch mortgage onto repayment basis. As in the longer term as reducing your mortgage will improve your LTV and ultimately the amount your mortgage will cost you both.

laura2481

What are the chances of finding a fixed rate repayment mortgage? Will it be better just to stick with the building society I'm with? What if they go bust?! ...
Sorry, panicking a bit...

b0rker

laura2481 wrote: »

What are the chances of finding a fixed rate repayment mortgage? Will it be better just to stick with the building society I'm with? What if they go bust?! ...
Sorry, panicking a bit...

I am not seeing if you have mentioned the bank your currently have your mortgage with? To be honest at the moment the bank that your mortgage is with going bust is really the least of your worries. If the bank gets into serious financial difficulty it will more than likely be bailed out by the taxpayer.

Anyway more importantly is your issue with what type of mortgage you should have. I am not sure of what 90% LTV deals are available. I would suggest that you discuss this with an IFA or an MA. This is assuming that your £10K will enable you to drop below the 90% LTV. Either way speak to an IFA or and MA.

laura2481

b0rker wrote: »

I am not seeing if you have mentioned the bank your currently have your mortgage with? To be honest at the moment the bank that your mortgage is with going bust is really the least of your worries. If the bank gets into serious financial difficulty it will more than likely be bailed out by the taxpayer.

Anyway more importantly is your issue with what type of mortgage you should have. I am not sure of what 90% LTV deals are available. I would suggest that you discuss this with an IFA or an MA. This is assuming that your £10K will enable you to drop below the 90% LTV. Either way speak to an IFA or and MA.

thanks, good advice

setmefree2

You should read this

http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

Martin's Article on "Should I pay off my mortgage?"

You should pay off all higher interest debt before paying of your mortgage. On the MFW board generally people feel that you should have at least 3 - 6 months savings (maybe more) before POYM. Also many (including myself) feel you should use your ISA allowance before POYM. There also other considerations such as your current pension contributions - are they adequate?

Hope that helps

All The Best

SMF2

laura2481

setmefree2 wrote: »

You should read this

http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

Martin's Article on "Should I pay off my mortgage?"

You should pay off all higher interest debt before paying of your mortgage. On the MFW board generally people feel that you should have at least 3 - 6 months savings (maybe more) before POYM. Also many (including myself) feel you should use your ISA allowance before POYM. There also other considerations such as your current pension contributions - are they adequate?

Hope that helps

All The Best

SMF2

(hanging head in shame)- I don't have a pension sorted out. Please don't shout too loud.