Mortgage overpayments or ISA saving for a bigger deposit?

72chapeltown

We have approx 110k left on a tracker mortgage at 0.89%, 25 years still left on it. We want to buy a bigger house in approx 2 years time. Should we overpay the mortgage each month, or put the money into a 3% cash ISA to then use to increase the deposit on the next house?

Logic would dictate that we put it in the ISA as it has the higher interest rate and is disposable, but we still have 25 years left on the mortgage and it's a much bigger sum. We would be looking to buy a house for about £250k and can save approx £400 per month.

Am I also right in thinking that car finance is ignored by mortgage advisers because the car is technically owned by the finance company until it is paid off in full? i.e. should we overpay this loan by £100 to pay it off earlier, or use the money to overpay the mortgage/put into the ISA?
Very confused about what is the best option. All advice gratefully received!

dimbo61

Any lender will take into account other debts and I guess you are paying more than 3% on the car loan so pay that off first.
Then because your interest rate is so good I would build funds in cash ISA,s
You maybe able to port your existing mortgage deal to the new property and borrow the rest from the same lender so the more you owe at 0.89% the less you need to borrow at a higher rate.
Your lender may well want you off the great deal you now have

kidmugsy

72chapeltown wrote: »

We have approx 110k left on a tracker mortgage at 0.89%, 25 years still left on it. We want to buy a bigger house in approx 2 years time.

What a bargain. In your shoes I'd move heaven and earth to satisfy your desire for more space by building an extension, converting an attic, digging a basement, .......

Thrugelmir

72chapeltown wrote: »

Am I also right in thinking that car finance is ignored by mortgage advisers because the car is technically owned by the finance company until it is paid off in full?

The monthly commitment will be viewed as an outgoing for affordability purposes.

Saving is the best option considering the interest rate you are paying.