Are my calculations/thoughts correct.....

Ems112

We are in the process of selling our house and moving up the ladder The difference is circa £50,000. We do have this amount saved in anticipation of the move plus money for agent fees, SDLT, registration fees etc (we have been putting money aside into ISAs etc for the last 2-3 years in readiness). My question is are we better off borrowing the £50,000 (at a Woolwich 2 yr fix of 2.68% arr fee £499) and keeping the £50,000 we have saved in our ISAs which are currently at a rate of 3%.....

For info our sums/figures are as follows:

Sale price - £199,000

Purchase price - £249,950

Current mortgage - £88,000 tracker @ BBBR + 0.74% = 1.24%

Current joint income before tax £52,000p.a (no dependents at the moment!)

My thought process is that after the 2 year fix has expired we can evaluate where interest rates are and, if necessary, clear the remainder of the fixed rate proportion of our mortgage thus meaning there will only be the residue of the ported mortgage product (i.e. the Woolwich tracker at 0.74% for life). It also means that for the first few years we will still have some "rainy day" money just in case we need it for home improvements etc.

Any advance/thoughts welcomed!


Thank you in advance.

Thrugelmir

The £499 fee will outweigh the additional interest earnt.

Also you will move onto base rate plus 3.39%. Unlikely that instant access savings will offer this rate.

So appears you'd be repaying the mortgage anyway.

Ems112

Yes, you are right.

I don't like the thought of completely clearing out our savings pot in order to purchase. Further we need to make some home improvements (new kitchen, bathroom etc). My logic was that if we borrowed a little extra than we say need then it would allow us some rainy day money and money to update the house a little. I guess I am looking at it more as a short term loan than a mortgage on the basis that we would repay the additional borrowing on expiry of the 2yr fix.

dimbo61

Have you looked at additional borrowing from woolwich ?
You have a great LTV even with the extra borrowing I think ! read the terms and conditions about porting the existing tracker as you may have a limit on the LTV ie 60% or 75%
You may need to use say £30K of your savings and borrow £20K from woolwich but check the rates and any fees

Wh05apk

I think this is a case of where there is so little in it either way, so it's your call of whether to keep some money back, or use your savings, as you say after the 2 years, you can review things then.

Ems112

Yes, I have already spoken to Woolwich. They have confirmed we can port our existing product which is 0.74% tracker on a LTV of 60% so we do qualify to port the rate. They said the additional borrowing would have to be at one of their current rates or SVR. Their SVR is 4.99% (ouch!) so not keen to go down that route. However, they have a loyalty rate (which we qualify for) of 2 yr fix at 2.68% with a fee of £499 which we could borrow say £30,000 and then use some of our savings to top up the balance required and then after 2 yrs use the remaining savings to pay off the additional borrowing element. Hopefully by that time we will have finished any home improvements and added further to our savings. Do you think this is the best way forward?

dimbo61

Yes it looks the cheapest way as 1 you want to keep that tracker deal and 2 you need a little extra cash to do the improvements.
Just work towards repaying the £30K asap so overpay that part first if allowed or build up savings so that when the fix ends you can repay that part,