Overpay Mortgage or Save For Extension?

vein

I think this thread is best suited in here....

Whilst out in the back garden having a wee day dream about adding an extension to my home (as i often do ) I had a thought to myself. Bear in mind that I cant see me extending my home for at least 4-5 years.

Basically I was thinking should I...

a) try and overpay my mortgage as much as possible to reduce it in 4-5 years or...

b) should I try putting any over potential overpayment money away into savings to try to reduce the amount of re-mortgage I would require to extend the house?

I cant get my head around which option would be the most financially sensible!!

I dont want to give too much away but I'm 1 year into a 30 year Mortgage.

CLAPTON

I see, so you are holding back vital information so as to prevent people giving you best advice.

most bizarre

vein

CLAPTON wrote: »

I see, so you are holding back vital information so as to prevent people giving you best advice.

most bizarre

Ok, maybe didnt come across the way I meant it and now I think about it I really do need to be supplying figures. Not too sure If you really had to post so sarcasticaly there though??

Anyway 1 year into a 30 year Mortgage.
Total Mortgage is around 185K
80K of this was ported from my last place.

therefore 105K is at a rate of around 7% fixed for 5 years.
80K is on a variable rate unfixed at 1.5%

Thats where it gets complicated as I would need to investigate if I can overpay the 80K on its own as obviously the 105K is fixed in and would be charged for overpaying. I guess I'm just looking for opinions on what the most sensible route for me would be here.

getmore4less

vein wrote: »

therefore 105K is at a rate of around 7% fixed for 5 years.

That must be bad credit or very high LTV or you got ripped off.

depending which will decide the future options

vein

getmore4less wrote: »

That must be bad credit or very high LTV or you got ripped off.

depending which will decide the future options

90% LTV but ripped off too

I knew the rate was awful when I signed up for the mortgage but to be totally honest after a year in this house I have absolutley no regrets from signing the mortgage papers. I hated living in my last place and could not wait to get out, my stress levels have completley dropped by moving here.

The saving grace in all of it was that I could port my old mortgage at the standard variable rate which I'm aware could rise in the future but at the moment keeps my repayments down significantly.

getmore4less

OK my gut feeling

Overpay the fixed the most you can before penalty

Save the rest you should be able to get a better rate than the 1.5%

Enjoy those those days in the garden.

If you have wireless and a laptop you could plan the extension over a beer

http://sketchup.google.com/

bacard1

I would have a look if you would be charged for overpaying the 105k, some fixed will allow over payments. You need to decide if you want the extension, if you overpay you will not get your money out (unless the mortgage allows you to drawback overpayments). Personally i would overpay

opinions4u

Ignoring the extension idea, financially you would be better off overpaying (up to the point where you get charged for doing so) than saving. Simply because savings rates are lower than mortgage rates.

There are concerns for your extension plan though.

The main one is that you are assuming that you will be able to remortgage and raise the finance required at the point in time needed. This is by no means guaranteed. At least if the funds are sat in a savings account you have complete control.

dimbo61

You already have a LTV of 90% and lender now have a " care of duty" towards customers to not lend too much ( no more together mortgage for 125% of property) so difficult to borrow extra to fund your dream.


As others have said better off to overpay on the fixed part as paying 7% and build up savings to pay for extension in stages.

MoneyMission

Oh, Vein. You and me both. We dream of an extension and are in a slightly better financial situation than you. However, not sure we want to add a HUGE amount more to our mortgage and miss out on our days out, slightly nicer holidays etc that we are currently enjoying. I have been a frugal-ite for 7 years (since the kids were born) and now they're both at school and I'm working part time our financial situation is so much nicer. We currently pay off on the mortgage (its been interest only since the kids!) as much as possible as in the long run it will save us more money. Hope you make it a reality one day.