Use savings to get LTV under 90%?

bubblepop_2

I bought a new build flat in July 2007 for 118k and currently owe £90500 on the mortgage. I've been on SVR for the past year and just starting to think about fixing, but HSBC tell me the property is now worth 96k and they can't fix my rate as it's now 95% LTV. I do have 10k inheritance which I could pay off to get it under the 90% which I'm considering as then at least I can guarrantee a rate where I'll be paying something off the mortgage each month (and feel like I'm doing SOMETHING to help the situation!) But worried then about having no actual cash left in savings and putting all my hopes into house prices rising in a few years - what if they fall again and I again find myself at over 90% LTV?

Absolutely gutted I've lost all the deposit I put down when I first bought and absolutely terrified of spending the rest of my life in a one bed flat!

Should I pay off some of the mortgage to fix the rate or hang onto the savings and just see what happens with the SVR and interest rate rises?

CloudCuckooLand

£96k less 10% is £86,400, so you'd only need approx £4k to get under 90% LTV.

Leaving you £6k as an emergency fund. Depends how this compares to your salary - if 3 to 6 months worth, that's more than many people have got.

If the Fixed interest rate leaves you some leeway to save, has no or a very small fee, and lasts more than 2 years, I'd fix.

opinions4u

Do you agree with their desk top valuation?

Would it be worth paying for a new valuation?

Premier_2

If I understand it correctly:

Current HSBC variable rate is about 4%
Fixed rate you are applkying for is about 5% ... but it's only fixed for 2 years (well until April 2013)

That means you would currently be paying 1% more

Now interest rates will eventually rise. No one knows for sure when or by how much, but many think perhaps about the end of the year. I would expect them to rise in 0.25% jumps (assuming nothing drastic happens in the meantime)

So lets assume you pay 1% over the odds for this year - that means you'll need to be saving 2% for the following year just to break even.

It depends on how quickly you think rates will rise,when, and how much you are prepared to pay to ensure you are not affected by rate rises for 2 years, but I suggest you think very carefully before progressing. Do you really think interest rates will have gone up by 5 times the current rate in 12 months?


As for using some of your savings to repay the mortgage (whatever you decide to otherwise do with the mortgage) that depends on how much savings you would prefer to keep for a rainy day ... and how much interest you currently earn on that compared to what you are paying to borrow the same.