Have I done the right thing?

matthew74

Hi

I am in the process of renegotiating my present mortgage.

I hope I have done the right thing - I have just buried £29000 into my mortgage to reduce my LTV to 75% and give me access to a 2 year fixed rate of 3.69%

Without the overpayment I would have been limited to a 4.29% fixed rate.

Was I right to take £29000 out of savings to do this - it seems like a lot less security, although I still have about £40000 in easy access accounts, cash ISA's and investment ISA's.

What do you think??

Thanks.

getmore4less

you have enough to cover emergencies.

Just start saving again.

Start with the savings on the mortgage now it is at a lower rate.

matthew74

Thanks getmore4less , it's a shame my 2 year tracker at 0.39% above base rate had to come to an end!

Leon_W

It would depend on the size of the mortgage.

If it took £29000 to take your mortgage from 76% to 75% then your mortgage would have been HUGE ! and the saving on the rate would be well worth it.

However, if your mortgage was smaller and you needed that amount to get from 90% to 75% then the rate saving isn't going to make so much difference plus you've lost the investment return on £29,000 which may have indeed been silly.

regards

matthew74

Leon

Thanks for the reply. The 29000 has taken me from a balance of 233000 (86% LTV) to 204000 (75% LTV).

I can't get near 3.69 or even 4.29 % net in a savings account (higher rate taxpayer) so seemed sensible to put it into the mortgage, especially as it gave me access to 75% LTV mortgages.

Peelerfart

So the return you have acheived on your £29,000 is £225.00 pp month assuming 25 year term.

That sounds like a good return to me.£225 times 24 months = £5,400.00

matthew74

Peelerfart

I could have kept the £29000 in a 3.25% savings account thus netting (after 40% tax) £565 per year.

If I had not done this I would be stuck with a 4.29% fixed mortgage which would have meant interest this year (on about £233000) of roughly £9867, instead of which I will be paying 3.69% on £204000 which is roughly £7527. Saving about £2340 on interest.

If you subtract the £565 I could have got I reckon I am making a saving of about £1800 a year or £3600 over 2 years.

So yes I think your figures are broadly correct but don't take into account interest I could have made on the £29000 in savings.