mortgage vs savings-complicated!

freeleaf

I'd be grateful for any advice on our situation please. We have a £125000 repayment mortgage with about 8 years to go. We've been overpaying it by about £600 a month to get it down-we're in our mid 50's now. We've got a good deal as it's only .50% above base rate, so it's currently .67% interest. The mortgage is portable, and we plan to sell our house, which is too big for us, and move into a small buy-to-let that we have. The buy-to-let has an interest only mortgage of £150000, so we were planning to change this to our repayment mortgage, at the low rate of interest, and pay it off quickly. The question is, if our mortgage company wont let us top up the mortgage (from £125000 to £150000) at the existing rate, would we be better off not overpaying it, and saving the money instead? As the mortgage we need to carry over will be lower, and therefore the amount we'll have to top up at a more expensive rate will be more?
Thank you for replies

Twiddy

Hi Freeleaf

You're not wrong, it is complicated!!!

Going from my own past experience with additional borrowing, we couldn't "top up" the existing mortgage and had to re-mortgage a small portion against a new and higher rate.

If this is the case for you, then I would remortgage and overpay against the higher rate mortgage to clear the additional borrowing first, then start attacking your main mortgage.

Hope this makes sense. Good luck in whatever you decide.

Best of Luck
T

dimbo61

Have you got other savings ?
You could get 3% tax free in ISA,s
You dont give the LTV of either property and the amount of equity in both
If you overpay your home mortgage then you can port LESS! so better off to build up savings

freeleaf

thanks for the 2 replies. I think we'll save the overpayment so that we can port more of the 'good' mortgage over, perhaps use the saved money to borrow less at the higher rate.

Thanks again for replying

getmore4less

Break it down to simplify.

1. You should stop overpaying because you can get better rates elsewhere.

2. You then need to ask if they will let you port this to another property you allready own. Just because it is portable does not mean they will let you port.
What is the value of the BTL and income, you need to pass current LTV and income criteria.

3. how much cash will you have when you sell, you still need to pay of the remaining debt at some point. £125k over 8 years is over £1300pm

4 this does not add up We've got a good deal as it's only .50% above base rate, so it's currently .67% interest