Is it really that simple?

is_the_kettle_on

Hello there mortgage money savers.
I seem to have thunk myself into a corner and can't get out.

I have a SVR product at 3.5% on interest only.The property in question is rented and provides an excellent return which I hope and expect will continue. Partly due to this good return I have established a good stock of savings, currently this is in excess of 50k. I have over the last few years (and indeed to get on the property ladder) saved quite hard and gotten used to seeing money earn it's keep in savings. However the savings arena has changed tremendously and obviously savings are not what they used to be.

My circumstances (currently travelling) restict me from seeking out a new mortgage product easily so I am happy to stay put for now, but my question is am I mad to maintain such a savings balance with a c.200k mortgage?

I worry that if there was a further crash, interest rate hike (insert your choice of catastrophy here) my coffers would be well placed to help me survive. Paying off a large sum towards my mortgage would undoubtedly save lots of money in interest payments but I seem to be reluctant to part with this cash, is this madness?

Other points...
Offset probably not possible (I would expect to struggle to remortgage)
A new BTL mortgage, (I'd probably qualify based on rental income) would push up fees and so wipe out any saving.
I CAN overpay without penalty.
I do fully use Cash ISA's.
I have no other debt.

I realise replies are bound to be subjective and vary depending on personal attitudes to risks etc but I would still welcome any comments you may have.

firstaspect

Do you get more than 3.5% from your savings? If yes then it's worth saving, if not then you'd save more money by putting it onto the mortgage.

Wobblydeb

firstaspect wrote: »

Do you get more than 3.5% from your savings? If yes then it's worth saving, if not then you'd save more money by putting it onto the mortgage.

Agreed -although you've also got to factor in that the interest on your BTL mortgage is allowable as an expense, thus reducing your tax bill.

You are submitting a tax return I take it? If not, then keep some savings back in case HMRC catch up with you....

I would also suggest keeping some back for potential voids / boiler breakdown / problem tenants etc.

Perhaps use a proportion of it to reduce the mortgage?

getmore4less

Traveling so might not be paying any tax.

I think you probably should keep the mortgage you have 3.5% on a rental is good.

Having a healthy savings buffer is also good so I would keep some or all of it.

If happy with the size of the savings pot why not start overpaying from income or put say £10k into the mortgage and rebuild the savings back upto £50k and do the same again

Currently you can get 2.5% easy and more if you scrape around so the money is costing you 1% for peace of mind on £50k that £500 per year

Maybe £20k-£30k is enough

Engeroosi

if you over pay can you pull the money back out the mortgage? I know some n/wide mortgages offer this but RBS don't. if you can then you can have best of both worlds.

is_the_kettle_on

Good idea to see if i can 'withdraw' overpayments, I will look into this.
And to getmore4less, thanks, this was really the crux of the matter. Perhaps I am now happy with savings pot, now that it has gotten to a sum that could be construed as useful. So I should now just overpay with gusto!

Thanks again!