Over pay or save for new house?

scholesy69

Hello,
Me and my wife are thinking of moving in the next couple of years. We estimate our current house to be about 150K with 115K mortgage outstanding. We have about 30k in various savings/shares/ISA's.

The house we would be buying will be about 250K

The question is it better to over pay (using our savings) and reduce mortgage during the next 2 years then apply for a smaller mortgage (maybe 185k??).

Or to keep saving (maybe making it up to 40k) then to ask for a larger mortgage (maybe 215k?). Does it really matter? Better to have cash in the bank or smaller current mortgage to make it easier to get a good new mortgage?

Scholesy69

Let_Us_See

Just compare your mortgage interest rate to your savings rate.

Thrugelmir

The lower the LTV the better the mortgage rate.

As LSE says, is your savings rate better than your mortgage rate.

Though keep an emergency cash fund if you do decide to pay down the mortgage.

scholesy69

But is it that simple. If the house needs 10 to 15k worth of work is the mortgage company likely to give this money on top of the basic amount required. Or is it better to already have that cash ready and hence not taken and extra 15k out on the mortgage??

Scholesy69

Thrugelmir

scholesy69 wrote: »

But is it that simple. If the house needs 10 to 15k worth of work is the mortgage company likely to give this money on top of the basic amount required. Or is it better to already have that cash ready and hence not taken and extra 15k out on the mortgage??

Scholesy69

If the house requires work of say £15k. In a finished state worth £250k.

then the surveyor could value the house only at £235k. So the LTV for mortgage purposes is lower.

85% of £250k = £212K mortgage
85% of £235k = £200k mortgage

baby_fuzz

Let_Us_See wrote: »

Just compare your mortgage interest rate to your savings rate.

also consider how long any savings need to be locked away for - as this would affect how fast you can get moving, as this can affect yoru bargaining position.