Advice

geo1234

Hi guys I am new here and looking for some advice!

I recently just bought my first house there and have got a mortgage were i can pay extra into anytime, Me and my fiance have given ourselves 3 years to save 10k to use with our initial 10k deposit plus what we have paid in and any equity that we hopefully have to help buy a bigger house the question i ask is are we better paying our savings into the mortgage or better trying to save the money in hard cash

thanks in advance

George

SAMMYE_2

geo1234 wrote: »

Hi guys I am new here and looking for some advice!

I recently just bought my first house there and have got a mortgage were i can pay extra into anytime, Me and my fiance have given ourselves 3 years to save 10k to use with our initial 10k deposit plus what we have paid in and any equity that we hopefully have to help buy a bigger house the question i ask is are we better paying our savings into the mortgage or better trying to save the money in hard cash

thanks in advance

George

How much is the interest rate on your mortgage?

RachelOnna_2

These days, the interest rates on mortgages largely outstrips any savings you may have.

10k on your small mortgage is a sizeable sum. I would overpay on my mortgage, and then you pay less interest, and the money is locked in. Also, this will hedge you against any negative equity risk that you may be up against when you come to selling.

In the first few years, you mostly repay interest, and you will not be able to repay too much equity

Use an overpayment calculator (there's one on this website) and try to predict how much more equity you would have cleared in 3 years

geo1234

Thanks guys I think im going to pay more into the mortgage so its there and cant be used, i was doing some rough somes there and if i save up or pay into my mortgage 500 pm extra for 7 years i should be mortgage free maybe this would be better than selling after 3 what do you think

Mortgage_Reduction_Novice

geo1234 wrote: »

Thanks guys I think im going to pay more into the mortgage so its there and cant be used, i was doing some rough somes there and if i save up or pay into my mortgage 500 pm extra for 7 years i should be mortgage free maybe this would be better than selling after 3 what do you think

I agree, interest rates at the moment mean it's better to use any spare money to pay off your mortgage rather than putting it into savings. Don't forget though, you need to have just savings for emergencies... I think when I last looked Martin was recommending about 3 months wages in savings as backup.

dimbo61

It costs money each time you move house !!! with all the costs stamp duty,fees, solictors,surveys ETC you can spend thousands.
As others have said you need to build up 3/6 months of income in cash ISA,s as emergency funds and then overpay as much as possible each month!
If you could clear the mortgage in 7 years and then sell to move to your " forever home" you would have a large deposit and therefore get the best deals as LTV less than 60%
Only my opinions Good Luck

norabatty_2

The best savings accounts out there at the moment would get you around 3-4%, before tax if you're not using ISAs. So if your mortgage interest rate is currently more than you can find in a savings account, you are always better off overpaying the mortgage. If however, your mortgage interest rate is less than 2.5%, then you might be better off putting the extra money every month into a tax-free ISA or a Regular Saver, some of which can attract up to 8% before tax.

In terms of moving, alot can happen in 3 years, nevermind 7. When I moved in with my boyfriend, the 2 bedroom flat he bought was a palace in my mind. 3 years later we were married and felt claustrophobic in the same space and just had to move. I now live in a 4 bed house, loads of space for just the 2 of us, but I suspect that in 5 years, we may outgrow this place too once kids come along.

In the meantime, there is no harm in overpaying/saving, you are investing in your future and once it is set up to automatically come out of your account once you get paid, you don't even notice that you don't have a few hundred quid to waste on rubbish every month. If you can, you are better off only moving the once, but sometimes this is just not possible depending on your joint income at the time you are applying for a mortgage. If you can wait until the mortgage is completely repaid, brilliant. If not, any savings/OPs will help you regardless.