Not exactly mortgage free material but can anyone offer advice...

ironman1

I've posted a similar topic on another forum but if anyone could help i'd be grateful. Me and the other half are both 23 and living in our first place (moved in October 2008).

Due to high deposits and so on we got a 50% shared ownership in a nice new build 2 bed flat in a decent area which cost almost £200k, our first place. We paid a deposit which took our share down to around £86,000 mortgage, with the other half rent. It is quite expensive but we are aiming on eventually buying the other half. At the moment we are paying it off over 40 years (the advisor talked us into it!) but now pay a standing order of £100 extra per month.

My question is, with around £6k in savings should we use all or some of that to pay some of the mortgage off or keep it and carry on paying the ridiculous interest fee's? (We are on fixed for 5yrs at 6.1%).

At the moment we cannot consider using the savings to buy more of the property, what with work being a bit dodgy at this moment in time.

Basically I just wanted some advice in what to do with the £6k savings. it's not a huge amount I know but we dont owe any other debt other than the mortgage.

Should we-

• Use it to pay off some of the mortgage
• Use half of it to pay a bit off, save half for a rainy day
• Save it but keep overpaying as much as possible
• Or blow it all on drink and drugs

Any advice welcome. Thanks for reading!

Thriftyknickers

Does your mortgage give you the ability to (easily) draw down on any overpayment? Generally the advice seems to be to keep 3-6 months worth of salary, easily accessible, in case of redundancy etc. However, if you can overpay but still access this money should you need to, this sounds like a very good bet as you'd be struggling to get a 6.1 nett return on instant access savings. This is what I do with my Nationwide mortgage and have drawn down to buy DH's car.

ironman1

We no longer have a car (didn't use it enough) that has saved us a bundle. Im not sure about accessing the money, we will have to ask Halifax about that. At the moment we have £3600 in an ISA but the rest is in low interest accounts, maybe we should save the ISA but put the rest towards the mortgage? I know it seems an obvious choice but as you say, if we cant access the money we put in it barely seems worth it. With an 86000 mortgage a couple of grand knocked off it will hardly change our lives whereas it is a decent amount of money to have for a rainy day.

Quite a nice dilemma to have but then again with our crappy mortgage it doesn't seem that way

ironman1

Surprised we never got many replies here, maybe everyone is as confused as me about the overpayments/saving dilemma!

Cheers anyway, I'll see what the bank advisor's* have to say






*in it for themselves

tegai1

Save it but keep overpaying as much as possible!!!!

Desperate_Housewife_2-2

It depends on your circumstances, how safe are your jobs, do you have dependants etc..

Would it make sense to pay the fee to change mortgage as this may save you more money in the long run? How much of the monthly payment is made up of interest/rent/paying off the capital?

You may need to look into your contract as some mortgage providers won't allow you to overpay or you can only pay off a certain amount.

Good luck.

Desperate_Housewife_2-2

Just done a few sums for you....

interest on a 86k mortgage = 86000 x 6.1% /100 = 5246 quid a year x 5 years = 26,230 quid over the fixed term period. Maybe you could change mortgages as the fees may only be around 3k so saving you a packet over 5 years. You could then put the saved money into paying off the capital.

You could use the 6k to help you remortgage even...

Just a thought...let us know how you get on.

nrsql

Changing mortgages looks like a good bet on that rate.
For instance firdt direct do a 3 yr fixed rate offset at 4.49% so you wouldn't have to worry about where to put savings.
It might not be good for you as you would need to be careful not to overspend and don't know if they consider shared ownership but it's good to use for comparison with other products.