When to remortgage?

jhanlon

"It's better to pay off your loan/ mortgage than hold back savings for the interest gained." This seems to be the general rule but I think my situation's more complicated:

I've just come into an inheritance which along with my own savings should be able to cut my mortgage in half if I throw everything at it. At the moment I'm enjoying the ultra low SVR as my fixed term expired in the Autumn. I think it's around 2% which is obviously a way better rate than any deal available at the moment. The downside to not switching however is that although the rate is good, I've only paid off about 8% of my home's value (thanks to the crash) so the amount owed is still huge and there's precious few high interest accounts for the savings which will soon amount to about £90K.

So is it better to stick with a good rate against a massive loan or a higher rate against a much reduced one?

sammyjammy

What are your plans for the future regarding your mortgage? Do you plan on moving it to a fixed rate or a tracker at some time or are you going to take your chances on SVR longer term? If you can get a higher interest rate on a savings account (after tax) then it might be sensible to save it if you trust yourself not to dip into it too much. You could consider an offset mortgage.

Personally if it was me I would reduce my mortgage with 80% of the mnoey nad save the rest but I'm obsessed with geting rid of my mortgage even at the cost of losing out on better interest on my savings

dimbo61

Couple of questions !
Do you have an other expensive credit or loans to pay off first.
Do you have any emergency savings 3/6 months of income
Do you need a new car ,kitchen/bathroom
If it was my money I would put 2X £3600 into cash ISA,s now and 2X £5100 in april
The rest would go on reducing the mortgage to get a 60%LTV for when I do need a new deal.
I would try to overpay each month as very low SVR and you have reduced the mortgage by 30/35% to clear ASAP
Only my ideas GOOD LUCK

jhanlon

I don't have any other loans and I will certainly keep a contingent as an emergency fund. I've also filled my current year's cash ISA.

Since my 1st post I've carried out some very crude calculations based on approximate interest rates and found I'm better off waiting before I remortgage. This is because although interest rates are at a record low you can still earn 3 or 4% on the better accounts and this makes all the difference. So I'll be stashing the surplus until rates start to rise.