Repay mortgage or do something better with the money

wavingflag

Hi,

I'm looking for some advise; both about what i should do, and what i could do.
I'm in the fortunate position of owning a house with a mortgage, and have the same about of cash in an easy access bank account. The dilema is should i pay off the mortgage or do something else with the money?

The main reason why I'm procastinating is because we are considering moving up the housing ladder to a bigger house probably double the price (if we saw the right house tomorow we'd go for it, but i recon it'll be another 2 years+ before we move). In this case we would still have to have a mortgage around 50% LTV, and looking at the mortgage market I cant see anything as good as we are on (even before fees), so dont want to pay off one mortgage to then have to get another with worse conditions.

The Facts:

• current mortgage can exit at any time without penalty
• current mortgage Interest rate 1.79% + Base (so 2.3%)
• Roughly house value £250K and current LTV 50%
• have over 6 months salary other saving (ISA) which will be untouched
• No other debt

History:
When me and my wife first moved in together we rented one house. I wasn't a fan of the hassle of being a landlord so sold last year which is where the cash came from. Since then its been in a high interest saving account (3%) which after tax wasn't far off mortgage rate so for the sake of liquidity kept it there. This is coming to an end and now saving rates have dropped right down.

It's tempting to pay off for the compfort of it, but i know i'll look back and think there was a better way to do this. Equally putting money into an ineffecient place now doesn't appeal incase we take longer to find the "forever house".

Had a search on forum and didn't find anything about this - most post are about paying off mortage, or getting 2nd home.

So what would you do? Is there an obvious alternative I've missed here?

amnblog

Unless you are a higher rate tax payer your deposit interest covers the mortgage interest anyway.

Stay as you are and keep your options open.

TrickyDicky101

Does your current mortgage allow some form of borrow-back facility? Would be worth investigating if it does as you could pay down a chunk of the currently outstanding mortgage and 'borrow back' against this overpayment when aqnd if you need it (and simply to reactivate funding at this low rate eg when you do move).

FYI one of my Nationwide mortgages permits this - it was entered into in 2005, however, and I know at some point since then this facility has been removed from newer Nationwide mortgages.

wavingflag

amnblog wrote: »

Unless you are a higher rate tax payer your deposit interest covers the mortgage interest anyway.

Stay as you are and keep your options open.

Unfortunatetly the deposit interest (introductionary offer) is coming to an end and going to virtually nothing. Hence need to move. Thanks for the feedback though

wavingflag

TrickyDicky101 wrote: »

Does your current mortgage allow some form of borrow-back facility? Would be worth investigating if it does as you could pay down a chunk of the currently outstanding mortgage and 'borrow back' against this overpayment when aqnd if you need it (and simply to reactivate funding at this low rate eg when you do move).

Brilliant idea! I'll go check the paperwork tonight to see if i'm lucky. Thanks!!!

Yorkie1

There's a possibility that whatever answer they give you now about drawback, may change by the time you are looking to move.

2. Are you planning on retaining your current mortgage product until you move, and then porting it across (subject to lending criteria)? If so, I'm not sure whether it would be better to not pay off, given the relatively low interest rate?