Save or reduce mortgage with unexpected money

chuffee

I've recently been left £10k, I planned to save this money. However it occurred to me that I could use the money to decrease my LTV when re mortgaging.

My current situation is I owe just under £89k with 25 years 4 mths term remaining on a SVR of 4.24% The last valuation of the property (August 09) was £105k

I'm very keen to fix my mortgage, but until now I've struggled to find anyone prepared to offer me anything.

If I included the additional money in a re mortgage I would be close to a 75% LTV which I presume would open up more competitive rates to me. I could then reduce my term and continue paying close to the same, or slightly increased monthly amount.

My question is would the savings from rates for a lower LTV and a shorter term be greater than what I can get saving a lump sum?

I don't have any significant savings and have not used my ISA allowance.

chuffee

Apologies, after a bit more digging I've come across an answer to this on the forums.
I should have done a bit more reading first...

dimbo61

There is no straight answer to this question.
You might have your home valued by Natiowide and they may say you already have a 75% LTV ( Nationwide have said house values have increased by 10% this year)
Others might have a different view so look for a fixed deal you like the look of and offer to put more equity into the property if the valuation is low ( no 75% LTV)Please think long term 3/5 years if staying in home!
You also need that emergency fund 3/6 months of income just in case.

chuffee

I've got to admit the valuation side of this does baffle me. There have been very few sales in my area to help work out the going rate for property

I was definitley looking for a 3-5 year fix minium if possible. I'd be happier knowing where I stood than have to keep an anxious eye on base rates. I'm also keen to reduce my term and up my payments slightly, although I imagine there is an argument not to and overpay instead to give me flexibilty?

I spoke to a financial advisor in february and they said there was nothing available to me. It looks like things have changed a bit. Also because I've sadly found myself with money I wasn't expecting I thought that might help me get away from a variable rate. I take your point about keep some savings for the unexpected as well.

Thanks for you reply I've still got plenty to think about but it's been helpful