Advice on over payments needed

flyingember

I have a mortgage of £147k on a house currently worth about 210k When I took it out I was earning £70k but I was made redundant and ,after 6 months of job hunting, I have only managed to get a job earning £13k per year. The repayments on the mortgage are £1200 per month and I have been making up the shortfall in my living expenses from savings. I have savings of about £63k. I have almost 2 years to run on a fixed rate of 4.39%.

I don’t know if I should use some of the savings (say £53k) to pay down the mortgage and then go on interest only which would just about allow use to live on my wage plus benefits. I want sell to sell in about 5 years when my youngest leaves school and move to another part of the country. So I could get a smaller repayment mortgage at this time or could go back to repayment sooner if I find a better job. The alternative is to keep on paying the £1200 until my savings are down to £10k and then go on interest only.

Does any one have a view on which would be the best option?

Thank you very much for reading

FE

TOBRUK

flyingember wrote: »

I have a mortgage of £147k on a house currently worth about 210k When I took it out I was earning £70k but I was made redundant and ,after 6 months of job hunting, I have only managed to get a job earning £13k per year. The repayments on the mortgage are £1200 per month and I have been making up the shortfall in my living expenses from savings. I have savings of about £63k. I have almost 2 years to run on a fixed rate of 4.39%.

I don’t know if I should use some of the savings (say £53k) to pay down the mortgage and then go on interest only which would just about allow use to live on my wage plus benefits.

...
The alternative is to keep on paying the £1200 until my savings are down to £10k and then go on interest only.

Does any one have a view on which would be the best option?

Thank you very much for reading

FE

One thing is that you are not in negative equity which is a good thing. Have you adjusted your lifestyle to fit your income? You were until 6 months ago earning £70k but now earning £13k per year - A MASSIVE DROP. I ask because I understand how difficult it is having a good income to having to live off benefits! The changes you NEED to do in your life is major - first step is to look at all your outgoings and adjust your spending drastically. You stop all unecessary expenditure e.g. monthly mobile phone costs to PAYG phone, if you have tv subscription - stop it all together or at least cut the package etc. It all adds up!

As you have substantial savings you are able to make up the shortfall in your living expenses from savings. You obviously need to keep up mortgage payments. With regard your savings, you do realise that if you use the majority of this to pay your mortgage you would not be able to claim any benefit in the near future - you would have to declare the extra payments you have made to reduce your mortgage and I'm afraid it would be seen as deprivation of capital! They would view it as this even if you were to lose your job and you wouldn't receive any benefit!

Be very careful in what you decide.

flyingember

Hi

Thanks for your reply.

I have gone through my budget and taken it down as far as possible. I don’t have any loans or cc debt, SKY or an expensive mobile contract. I have cut back on other expenses, clothes, groceries, hair cuts and all the normal things over the passed 6 month. I can make the figures add up on my new salary plus WTC and CTC if I move the mortgage to interest only.

I suppose I felt the interest on 94K would be a lot less than on 147k so this would be a better use of the money. I can get WTC and CTC which (I understand) do not take account of capital but no other benefits.

Thanks again

FE

TOBRUK

I can see your reasoning behind using your savings to bring the interest down, I just wanted you to be aware of the situation if you found yourself in need of help. It's the 'what if' scenario:
What if you were to lose your job and unable to find anything else for a while? If you were to use your savings to pay your mortgage off the DWP would take it into consideration and you may not get benefit.

Perhaps someone else can advise you with regards your mortgage. Good luck.