Wanna be mortgage free, but how should we do it?

losername

Hi All,

I'm looking for some advice from you knowledgeable wannabes!

My wife and I are seriously thinking about buying a new house (actually just down the road from us), but we have come up with a cunning plan to get it paid of within 5 years (not really that cunning!).

The house is likely to cost us around £145K and we have a £40K deposit to throw at it (which I hope will mean we can get some decent rates).

We were planning to make overpayments against the mortgage (we think we can manage about £2K per month in total) with an aim to pay it off within about 5 years.

To complicate matters, we also have a flat to take into account (where we're living at the moment). We're not planning to sell it (we want to rent it out) and already have a buy-to-let mortgage on it.

Clearly, if we don't have tenants, we need to be sure we can cut our overpayments, so at this point, we want to ensure we're somewhat flexible, and don't need to pay the full 2K every month (or at least have access to it).

While chatting to an advisor, the idea of an offset mortgage was raised which made me wonder what our best options were.

In short, my questions are:

1. Should I get a standard repayment or an offset?
2. Do you guys think I'm mad for holding onto the flat too when interest rates are sure to go up soon and I'll have two mortgages to pay (potentially).

Sorry for the massive post

Any help appreciated.

Losername.

getmore4less

does the rental stack up as a business

What's the gross yield?


Does your current BTL mortgage allow you to live there?

losername

Wow! That was a quick reply!

So, questions;

I'm not certain about the rental income, but I'm pretty sure it will cover our current mortgage costs (circa £450 pm). I don't think we'll get a lot more than that, so the plan is really to slowly pay off the flat and keep it as a future nest-egg.

The BTL does allow us to live there - we're in there at the moment.

Cheers,

dimbo61

If you really can save £2K a month then an offset mortgage would be a great idea
YBS have a five year fix at 3.49% Fee £995 or 3.69% fee £95. 75% LTV
Building up savings in the offset account gives you a cushion with easy access if need to cover void periods in renting the flat or paying for repairs ( new boiler/roof!!!)
within five years you would be fully offset and able to pay off some of the mortgage on the flat

losername

Hi Dimbo,

Thanks for the response - we should be able to pay about 2K in total (including out mortgage payment), so I guess it might take us a little longer.

I guess I was hoping someone might be able to give me the necessary formula to work out if I would be paying extra to have an offset or a repayment mortgage?

If I'm honest, I'd prefer an offset for the reasons you've outlined, but I guess we need to try to work out how much we're prepared to pay for the convenience of instant access to our savings...

Cheers very much,

Losername.

dimbo61

Well the difference with YBS between the 5 year fix at 3.59% and the 5 year fix at 3.69% is only 0.1% and I think the flexability is worth it.
I am not a mortgage adviser and you are making a big decision so why not see a whole of market mortgage broker to see what they say