£28,000, should i put it towards my current mortgage balance ?

flyfto

I am about to sell shares worth £28k, looking at two options,

- wether to invest money in savings account etc or
- put money towards mortgage balance.

i am looking to move in to new build house in 5 years time, either saving money as deposit or putting towards mortgage.
i am due to remortgage in sept 11, and owe £92k to current mortgage

would nyone advise using my £28k towards my current mortgage, any suggestions/reasons would be most helpful

thanks in advance

opinions4u

Do you have a capital gains tax liability on the share sale?

What rate are you paying on the mortgage? Now and later in the year.

What ERC clauses are there for paying off debt?

flyfto

no i do not hae CGT liability we are spreading the gain between myself and my wifes allowance,

I am unsure of my rate just now as we have misplaced the paperwork but it is fixed and i will be remortgaging later,

early payment charges wont matter i dont think as iwould keep the money until remortgaging in sept.

we currently pay £580 per month on mortgage, but am wondering how much less we might have to pay if we put money toward mortgage when remortgaging.
our house is valued at £100K and we owe £92k, minus the £28k if i should put towards mortgage, meaning i only need mortgage for £64k ! are there good deals out there for my situation and is it worth me doing this

thanks brian

paddyz

My fixed rate mortgage only allows a 10% payment in each year, you need to check out your mortgage rate first before you decide whats best, I would just be putting it towards mortgage then i wouldnt be tempted to dig into it at a later date

Tina

Incyder

Maybe pay off 25k if there are no penalties, and save 3k for the "My gearbox has seized/My boiler has died" fund.

....and of course, pay off all your credit card debt, if you have it, before you do anything else as that will be costing you the most in interest.

Stalkdog

In a word... yes!

The main issue here is that unless your mortgage rate is ridiculously low, you'll struggle to find a savings rate that pays more than your mortgage rate. (top tip- keep your mortgage paperwork in a very safe place! :money: )

Personally I wouldn't concern myself with overpayment on your current mortgage, I would use the £28K as a deposit on your remortgage. At your current 92% LTV, you're really going to struggle for a decent rate, if you can get one at all. However, stick £22K from your fund and you'll be at 70% LTV and you're in a whole different place altogether! That would leave a £6K contingency fund. You could even look at stretching it to 65% as there are a few more mortgages there.

If you then opt to keep our monthly payments the same on your new, smaller mortgage as they are at the moment, you should be able to make a tidy overpayment each month, which will put you in a very nice place in a few years.

Can't advice you on the CGT part, but I'm sure someone will.

Remember, the sooner you do this, the more chance you'll get a half decent fix before the Base Rate starts to rise... which it no doubt will

flyfto

I have found my mortgage paperwork with help from the wife ! i am fixed until jan 2012 at an interest rate of 6.34%

Stalkdog

Cool, in that case it might be worth investigating the overpayment limits of your current provider. If you can't overpay on it, then you can stick it in a savings account until it's required.

Don't forget, you can guarantee your new fix up to 6 months in advance, so you could get your new mortgage sorted out in the summer, and then complete the remortgage in January when your current fix expires.

With improved LTV, you should be able to easily smash the 6.34 you're currently paying

getmore4less

flyfto wrote: »

I have found my mortgage paperwork with help from the wife ! i am fixed until jan 2012 at an interest rate of 6.34%

What's the follow on rate.

what overpayments without penalty

Whats the penalty for overpayments over that

Whats the target value of the new place(how much more do you plan to borrow)

flyfto

apologies i wrote that we got paperwork for quickness, what my wife found is a note of the apr we paying now and the end of fixed rate period, i am gonna phone santander tommorrow for the details you guys requesting to give me advice

thanks and sorry for lack of info

dimbo61

What you need to ask is
1 what is our current fixed rate
2 what does the mortgage revert to at the end of the fix SVR/tracker
3 how much are we allowed to overpay 10% 20% without paying ERC and can you pay that amount today
As others have said paying off a lump sum either now or when the fix ends will greatly improve your LTV and the remortgage deals available to you but keep a good emergency fund in cash ISA,s or consider an offset mortgage