Mortgage free question?

apache2020

Hi all,

My first post to this board although I have read previous posts with interest.

I am 34 and my wife is 34 also, I decided that I want to be mortgage free back in 2004, we had just bought a house in Bath for £182k with a £155k mortgage.

Basically my plan was to utilise my experience and go contracting, therefore I managed to extract myself with a good redundancy package of £30k which went straight off the bottom line of the mortgage. I then contract for 18months overpaying the maximum possible duirng my fixed rate period. Unfortuanetly the contract had to be cut short by me due to the sudden death of my Father, family commitments meant I was unable to continue.

That aside, it now stands at £100k and I cam coming out of a fixed rate next year of 5.15% (not great I know). I now have a permemnant job and the wife also will be working up until our first child (next year) and have a question. We have £38k in savings earning which although are in ISAs etc are earning next to nothing, we have no debts. I really am having trouble with whether to ditch the fix or not? I have been looking at the Yorkshire Building Society rollover mortgage and wonder if other products exist? What d you think of this?

To achieve the required 35%LTV we would need to use most of our savings which may not be wise if interest rates rise, is there better options out there? Thanks for the great forum all of you and heres to being mortgage free!:)

ryanemery

Depends on

1.) what SVR your current mortgage will go to. i.e at maximum 1% above base.
2.) your attitute to risk.
3.) what you think interest rates will do.

Without knowing your circumstances and mortgage product you may be better going onto your SVR.

I personally cant see interest rates going to anywhere near 5% anytime soon so a 5% fixed deal is a pretty good one for the bank.

The yorkshire fixed rate for 1 year deal means its a bit easier to budget for one year because you know what it costs but you dont really get the standard benefits of a fixed deal because if rates skyrocket then so does the rate you are charged, its just delayed by up to a year.

Example for me:
1.) In my case I was on a variable base rate tracker back when interest rates were 5%... However now it came to the end of its term the SVR states it will say within 2% of the base rate, im overpaying a bit anyways.

3.) In my opinion I dont think interest rates will increase significantly anytime soon.

I looked at other variable rate deals and fixed rate deals I couldnt beat the SVR my mortgage will go to... a few years ago the banks never expected low interest rates. Now they dont put such nice limits on their SVRs.

2.) Im not risk adverse so put my money into ISAs (cash and ETFs [commodities])

The key here is I expect that the return on the ISAs to be more than the cost of the mortgage so Im better of having the ISAs (note that this is because they are in commodities mainly , not cash).

If I was risk adverse and thought that I will only ever hold cash then im better off paying of the mortgage and having just a little bit set aside for a rainy day.

dimbo61

1 you need to find out what your mortgage reverts to at the end of the fix? SVR or some sort of tracker deal!
2 Will your wife be off work when you come to remortgage ?
3 Does she plan on going back to work ? More kids?
4 You have done well to overpay so much already so you may well be able to get a remortgage deal on your income alone.
5 You will need savings to help with the new arrival and its always a good idea to keep upto £16K in cash ISA,s as emergency funds
6 You could use the rest £22K to reduce the mortgage balance but I would take a long term view as a number of 5 year fixes at 3.99% available coop and ybs to name two
GOOD LUCK

apache2020

Thanks for the tips

1 you need to find out what your mortgage reverts to at the end of the fix? SVR or some sort of tracker deal! I have looked into this and Stroud & Swindons SVR is an uncompetitive 5.99%
2 Will your wife be off work when you come to remortgage ? No she will be coming up to term
3 Does she plan on going back to work ? More kids? She is planning on going back part time so 40% of current income
4 You have done well to overpay so much already so you may well be able to get a remortgage deal on your income alone. Thanks it wasnt half tough but its well worth it!
5 You will need savings to help with the new arrival and its always a good idea to keep upto £16K in cash ISA,s as emergency funds Point noted will bear this in mind when researching