To overpay or not

16hm

Hi all. I am planning in putting my house on the market soon, get a new joint mortgage in order to purchase a newer and more expensive house.

I have worked out how much I can afford for my new monthly payment and have an Aip from HSBC to show they may lend me that amount. This will be around £950

Current monthly payment is £450 on which I have been overpaying for a while with the actual figure of £600.

My question is for the next few months do I spend the extra £350 by overpaying even more or would it be better in an isa and then use it to pay for some of the cost associated with moving. My mortgage rate at the Moment is 4.54 percent.

I understand that the overpayment would simply form part of my deposit but would small dffifferences in LTV help or would be more prudent to keep some cash aswell?

Hope this makes sense.

937carrera

I wouldn't worry abouth the marginal differences in interest cost.

Cash is King - more so now than ever

Save the £350 per month (or even the full 500) and then you will have the flexibility when you move.

If you don't need the cash, then it will still be there after you have moved & you can still repay at the later date (assuming there are no penalties) or use to reduce the initial LTV, when you know it will actually be of benefit.

Thrugelmir

16hm wrote: »

My mortgage rate at the Moment is 4.54 percent.

Until such time as you move it will provide the best return.

dimbo61

Have you got any emergency savings or other debts besides the mortgage ?
Clear any CC debts and if possible pay off any loans
It helps if you have some money to pay fees when applying for a mortgage , pay legals, searches ETC.
Try and work out how much equity you will have for the next property and hence LTV

16hm

dimbo61 wrote: »

Have you got any emergency savings or other debts besides the mortgage ?
Clear any CC debts and if possible pay off any loans
It helps if you have some money to pay fees when applying for a mortgage , pay legals, searches ETC.
Try and work out how much equity you will have for the next property and hence LTV

Dimbo thanks for your reply, one which is very sensible. I must admit I have very little in the forms of savings at the moment and I do have a a little bit of debt, albeit in 0% accounts.

I am minded however not to pay off any more debt (as it is cheap) or save any more purely down to the fact that I know moving house will incur a host of charges and fees which will have to be paid now.

16hm

If I rephrase my question maybe that will assist.

My wife and i plan to move into parents house for a couple of months (personal reasons) and therefore will have sold the house at the point that I buy a new one.

So I will in essence get the overpayment back before I use it (hope this is still making sense!). Therefore is it worthwhile paying more mortgage off to save that little bit more interest since saving rates are so pitiful?

Thrugelmir

16hm wrote: »

Therefore is it worthwhile paying more mortgage off to save that little bit more interest since saving rates are so pitiful?

Yes. As you won't obtain a rate of 4.54% after tax risk free.

Allow enough funds to repay the 0% credit card balances.

dimbo61

To look good in the eyes of a lender and HSBC can be and are fussy you should clear all debts and have the deposit to give you the LTV they require ?
Please think long term as a mortgage is normally for 20/25 years and 2 years will fly by ( if you went for a short term fix!)

16hm

I dont have a lot of debts and our joint salary more than covers the multiple needed to move. Also I have an Aip on which thy performed a credit check on us both.

Also I would like to think that having had a mortgage for eight years with no missed payments would be a good thing.

Am I on the right track here?