What to do... Mortgage & Savings

Matthew_31

Hello everyone,

I'm just wondering what to do with our mortgage and savings.

We took out a 5 year fixed rate 5.09% mortgage with Skipton Building Society in August 2006 (for 25 years) and this has just expired this year and I understand we have now automatically gone on to Skipton's standard rate. Would a tracker be any good? Are the interest rates due to increase or stay the same or go down?

I'm wondering whether to stay on this product for the time being or consider some of Skipton's other products or perhaps more competitive products from their competitors? Either way I assume we will have a large arrangement/set-up fee (Skipton are currently wanting around £1,000 in fees).

Our initial mortgage was for £117,500.00 for our house which cost £135,000.00 with a £17,500.00 deposit. That was in August 2006. Last year I paid off a £5,500 lump sum but I don't think this hardly touched the sides, but we kept the repayments the same amount and shortened the term. Our mortgage repayments are currently approx £696 per month.

My partner and I are both in full time permanent employment and currently we have a joint gross income of around £70,000 per annum.

I have about £25,000.00 saved in various bank accounts, ISA, savings accounts, etc but this is getting very little interest/return. (I have £10,000 in an ISA account and got around £100 and odd pound this April).

My own salary is around £2,700 nett per month so I can save £1,200 of that per month - but not sure what to do with this? whether to start making over payments against the mortgage to have it paid off sooner? At the moment Skipton have said that I can pay off up to around £11,000 per year before incurring early repayment fees etc.

My partner has mentioned potentially moving house next year (2012) and upsizing to a 3 or 4 bedroom detached around £225,000 plus fees no doubt. We currently live in a three storey, 15 year old house with 2 bedrooms, garage, and conservatory.

Or do I just keep beavering away and sticking say £1,200 away in a savings account every month and me have control the cash rather than handing it over to Skipton or other mortgage lenders?

Sorry but I'm not very good with these sort of things - We work hard to earn our money but not sure what best to do with it, and what we can do to achieve the best return.

Thanks for reading, and I would be grateful for any comments or advice. Many thanks.

Regards

Matt

quicklee99

Hiya

Seems like you have a nice savings pot behind you, I know alot of people like to argue that if your savings rate is better than your mortgage rate then save, but don't be sucked into looking at just interest rates on their own.

Knocking £25k off your mortgage would not only reduce a big capital amount off, but it also reduces the interest you will be paying. Also when it comes to re-mortgaging it will put you in a better LTV ratio meaning access to better rates. So my thoughts would be to pay off a chunk of the mortgage.

Best of luck in your MFW quest

elwistua

Hi there,

No doubt you will get many replies, some very savvy people on here.

If I was in your position I would be bottoming out if I was going to sell up and move on first.

If you are moving I would put as much money aside as possible to reduce the amount you need to increase the mortgage by as possible. Also take into account any money you might need to spend once you do move, renovations and use cash to pay for those too.

If you are staying put I would keep £10k aside and use the rest to pay off some of the capital you borrowed in the first place. With interest rates so low on savings you are better off (unless you have a great savings rate, see some of the calculators on here). Then I would use some of the money you would have saved and 'invest' it in overpayments off the mortgage.

Matthew_31

Thank you both for your replies, some food for thought.

Regards
Matt