Advice appreciated :)

Horse_Owner

My mortgage is currently at £111140.81. It is a variable interest rate and I currently pay about £564 a month.
I also have a car loan which costs £238.28 a month I think it has 8% interest rate.
I can manage these payments each month with a few hundred to spare which is currently going into savings.
My goal is to move to a house with land so I can keep my horse at home (currently on a livery yard)
As I am single I am restricted on the amount banks will lend me as a mortgage. So I figure the only way to move up in the world is by building up a bigger deposit.
What is the best way to use my money?
Pay off car loan (this will not generate money for deposit but will affect how much the banks will lend me)
Pay off more of my current mortgage to increase equity
Or Continue saving in Isas etc.
Any advice appreciated.

downsizer3

Bin the car loan first, get yourself a safety net of savings (a disaster fund) then plough as much as you can into overpayments - depending on your mortgage rate and interest rate in savings its probably about 50/50 - personally I prefer to get the borrowings down ( ie mortgage).

Good luck!

abouttimetoo

Hi Downsizer

You don't mention what your mortgage rate is but I think I'm fairly safe to guess it's less than 8%?

Usually it would be considered good advice to pay the higher rate debt off first so in this instance the car loan but there are perhaps some other things you need to consider first

• do your car loan T&c's allow you to make extra payments?
• If so can you pay off the car (or make additonal overpayments) without penalty?
• depending on the outstanding balance of the car loan it may actually make more financial sense to put the extra money to the mortgage as even though it is a lower interest rate the fact that you are paying it on £111K+ rather than a presumably far lower car loan balance might make all the difference

Also, do you currently have any savings/emergency savings (you suggest you already pay into ISA's)

Some people will use spare money to build up savings if the interest rate is higher than their mortgage rate, others prefer to see the mortgage balance go down even if they could get a better return if they saved it. Some as Downsizer say prefer to split their extra funds between savings and mortgage.

You are right to think about building up a deposit as often better mortgage rates are available for those able to out down more. Do you have any plans e.g. a time-frame when you would like to move by? Do you have a ball park figure in mind to spend on the property and land?

Regards
ATT