£5500 savings - what to do with it?

ukclarkkent

hello,

i've got £5500 approx. in my bank gathering dust and i'd like some advice on what to do with it with regards to moving house later on in the year.

i've filled up my isa allowance @ 2.8% but i've got an outstanding car loan of about the same amount at 8.5% which i'm paying monthly. i'm not able to overpay any more on my current mortgage without incurring penalties.

my question is that i could be moving house next summer and was wondering whether that amount of money will help in re-mortgaging or will my current 70% LTV be enough to help me out. if it doesn't make much difference then it would be better off for me to clear my savings and pay the loan off wouldn't it?

thanks for reading and if you've got any ideas then please let me know. me.

Thrugelmir

You'll need a 10% deposit in cash to be able to move house. So make sure you have this before committing to repaying the car loan, which is the best course of action.

dimbo61

Hi not sure about the above answer!
You have got some emergency savings in a cash ISA £5100 and you cant pay any more off your mortgage without being hit with ERC.
You have got a car loan costing you 8.5% and the money to clear it.
Ring up the loan company and ask for a figure to clear the loan now then work out if that will save you money compared to paying all the rest of the monthly payments.
When you come to look for a bigger mortgage next year they will ask have you got other loans/finance and will deduct that from what you can borrow.
30% equity in your existing property will help get you another place but save and overpay until you do move to try and keep the new bigger mortgage LTV under 75% for the best deals.

ukclarkkent

Thrugelmir wrote: »

You'll need a 10% deposit in cash to be able to move house. So make sure you have this before committing to repaying the car loan, which is the best course of action.

that's a bit of a shocker to read! thanks though. didn't know this was the case. that's why i asked for some ideas on here.

blimey...that's taken the wind out of my sails...

ukclarkkent

dimbo61 wrote: »

Hi not sure about the above answer!
You have got some emergency savings in a cash ISA £5100 and you cant pay any more off your mortgage without being hit with ERC.
You have got a car loan costing you 8.5% and the money to clear it.
Ring up the loan company and ask for a figure to clear the loan now then work out if that will save you money compared to paying all the rest of the monthly payments.
When you come to look for a bigger mortgage next year they will ask have you got other loans/finance and will deduct that from what you can borrow.
30% equity in your existing property will help get you another place but save and overpay until you do move to try and keep the new bigger mortgage LTV under 75% for the best deals.

thanks dimbo. i might leave all as is until after chrimbo. not that i want to dip into my savings before then. i'll also clear 2 months of loan payments. the difference in interest will be a few bucks over the next 2-3 mths so no dramas.

even more confused over thrugelmir's comment now tho!!!

EDIT: i'm about 15 mths into a 36 mth loan so any early settlement now will drastically save me in the long run but i won't have a lump sum for any home movements in the summer...

ViolaLass

Thrugelmir wrote: »

You'll need a 10% deposit in cash to be able to move house. So make sure you have this before committing to repaying the car loan, which is the best course of action.

I've never heard this before. Why would you need 10% in cash? Do you mean for fees?

Thrugelmir

ViolaLass wrote: »

I've never heard this before. Why would you need 10% in cash? Do you mean for fees?

On exchange of contracts on the purchase of a new property it is standard practice for a 10% deposit to be put down.

So by cash I mean available liquid funds.

ukclarkkent

Thrugelmir wrote: »

On exchange of contracts on the purchase of a new property it is standard practice for a 10% deposit to be put down.

So by cash I mean available liquid funds.

never heard or thought of it but i'm glad i asked now.

had another thought that if i keep my tesco loan current then they might be willing to lend me more if i need it...

slummymummyof3

What about repaying the loan and then saving what you would have paid monthly in to a savings account?

ukclarkkent

slummymummyof3 wrote: »

What about repaying the loan and then saving what you would have paid monthly in to a savings account?

that was sort of my first option but i'm just thinking of the time it would take me to get that sort of money again. especially if i could be moving homes in the summer.

you're right though but i'm just trying to get other people's ideas. thanks.

slummymummyof3

You need to consider that a mortgage provider will take into account existing loan payments etc when they work out the affordability of a new mortgage. It is no longer as simple as 3x your earnings, unfortunately.

Alternatively, why not carry on paying the monthly amount on the loan up until the summer (keep your lump sum in savings) and then pay off the remainder in the summer - that way you will have made 8/9 more monthly payments so it won't eat into your lump sum quite as seriously but you will have also settled the loan prior to mortgage application????