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

tyllwyd

setmefree2 wrote: »

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

You should pay off all higher interest debt before paying of your mortgage.

But remember that Martin's article will have been written on the assumption that you are on a repayment mortgage (or have the repayment part covered in some other way), so he essentially he will be talking about overpaying your mortgage, which doesn't really apply in your situation while you have an interest only mortgage.

I think you should do your research before you decide what to do - you might find you need the money just to remortgage. And if you possibly can, if it was me I'd switch to a repayment mortgage to force me to save and not be in this situation again a few years down the line.

tyllwyd

Oh and it doesn't look as if there is any particular reason to worry about Coventry Building Society
http://www.thisismoney.co.uk/saving-and-banking/article.html?in_article_id=455447&in_page_id=7

And if even there was a problem, they'd probably just merge with one of the other building societies.

IveSeenTheLight

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).

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:

On the question relating to whether to use the 10k or not, the answer is simple. If you want the money to work the hardest for you, it should go wherever the highest interest is. i.e. if your mortgage interest is higher than the savings interest you are receiving then pay it down on the mortgage. It's amazing how many years you will save

Regarding interest only or repayment. It is best you repay, especially when interest rates are as low as they are.
By paying off capital now, you will pay less interest later when the rates go up

Thrugelmir

laura2481 wrote: »

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

While you have debts incurring high rates of interest. Wouldn't worry about a lack of pension provision. Unless you took a very speculative successful gamble with your pension investment as it wouldn't give a better return than repaying debt.

b0rker

IveSeenTheLight wrote: »

On the question relating to whether to use the 10k or not, the answer is simple. If you want the money to work the hardest for you, it should go wherever the highest interest is. i.e. if your mortgage interest is higher than the savings interest you are receiving then pay it down on the mortgage. It's amazing how many years you will save

Yes but as tllwyd pointed out the OP may need this £10K to secure a fixed remortgage at all. Be that repayment or interest only. If securing a remortgage and not sitting on the SVR is the OPs priority then I would suggest that they will probably need at least the full £10K to do this. I think sitting on the SVR is all fine and well for a couple of months but the OP needs to consider that every month they sit on the SVR their house value may well be depreceating by 1-2% a month. This will open up a bigger gap in the LTV and will eventually have to bring it over the 90% if it is not already there. So the OP could end up stuck on the SVR which of course is variable hence the name and will eventually go up, possibly so that it makes the OPs mortgage too expensive for them.

I am assuming that once the OPs interest only deal comes to and end that they will go on the SVR and it will revert to a repayment mortgage? Or will it revert to the SVR and they will still pay interest only? This is a blind spot in my knowledge.

IveSeenTheLight

b0rker wrote: »

Yes but as tllwyd pointed out the OP may need this £10K to secure a fixed remortgage at all. Be that repayment or interest only. If securing a remortgage and not sitting on the SVR is the OPs priority then I would suggest that they will probably need at least the full £10K to do this. I think sitting on the SVR is all fine and well for a couple of months but the OP needs to consider that every month they sit on the SVR their house value may well be depreceating by 1-2% a month. This will open up a bigger gap in the LTV and will eventually have to bring it over the 90% if it is not already there. So the OP could end up stuck on the SVR which of course is variable hence the name and will eventually go up, possibly so that it makes the OPs mortgage too expensive for them.

I am assuming that once the OPs interest only deal comes to and end that they will go on the SVR and it will revert to a repayment mortgage? Or will it revert to the SVR and they will still pay interest only? This is a blind spot in my knowledge.

I would agree, but generally, especially at this time, most mortgage interest will be higher than the savings

Phirefly

b0rker wrote: »

Yes but as tllwyd pointed out the OP may need this £10K to secure a fixed remortgage at all. Be that repayment or interest only. If securing a remortgage and not sitting on the SVR is the OPs priority then I would suggest that they will probably need at least the full £10K to do this. I think sitting on the SVR is all fine and well for a couple of months but the OP needs to consider that every month they sit on the SVR their house value may well be depreceating by 1-2% a month. This will open up a bigger gap in the LTV and will eventually have to bring it over the 90% if it is not already there. So the OP could end up stuck on the SVR which of course is variable hence the name and will eventually go up, possibly so that it makes the OPs mortgage too expensive for them.

I am assuming that once the OPs interest only deal comes to and end that they will go on the SVR and it will revert to a repayment mortgage? Or will it revert to the SVR and they will still pay interest only? This is a blind spot in my knowledge.

Surely all of the above depends on the SVR? It could well be that her lenders SVR is considerably lower than her current fixed rate (as mine is). I had been contemplating overpaying by a similar amount myself because I'm now self-employed so that in mind may find it hard to find a fixed deal with my current LTV. But with a bit of luck when my fixed deal ends the SVR will be as low as it is now, and I'll just switch to that and keep a cose eye on it. If if starts to increase dramtically, maybe then I'll make the overpayment. For me, the security of that buffer in the event of a loss of income is the priority currently. Don't panic OP.

laura2481

The SVR in 2006 was 6.59%, is it likely to be lower now?

I'm thinking i would feel more secure with that 10k in the bank nice and safe in an ISA in case of redundency or similar prob.

chairmanofthebored

Anyone considered offsetting the savings against the mortgage?

With the kind of rates you are getting on savings these days it's probably the best way you could get the money working at the moment, anything you save on your mortgage as a result could be put back into the savings to help them grow and thus reduce your mortgage payments further.

And seriously work on those debts, or become a rate tart and save yourself the interest on them at least.

laura2481

laura2481 wrote: »

The SVR in 2006 was 6.59%, is it likely to be lower now?

I'm thinking i would feel more secure with that 10k in the bank nice and safe in an ISA in case of redundency or similar prob.

Just checked the website and there SVR is now 4.99% Less than our fixed rate! I think tht has calmed my nerves a little, at least the payments won't shoot up if we can't find a good deal straight away! But we would have to pay the the 10k to get 90%LTV. Hmm, decisions decisions.