Where do we go from here?

purply

Hello all,

I would like some opinions please about our mortgage.

House bought in July 2007 for £103,500. Valued today at approx. £81k (bank used Halifax Index).

We have done a lot to the house so I'm not sure if the valuation is a true reflection but on the other hand, I am a realist!

We still have approx. £82k to pay off. So yes, negative equity and always have been really. Our interest rate has always been high (atm 4.99% SVR). We do try and make overpayments now and then, but they are not big overpayments.

(Our combined income is £37k)

We would like to move but know this is not going to happen anytime soon as our money is tied up in childcare fees (as well as the hefty monthly mortgage repayment) and will be for another 2 years and so no opportunity to save a deposit currently.

My plan is to overpay as soon as our youngest is in school (in 2 years time) and to bring the repayments right down to £60k so that we can start to look at buying another house (this might take a number of years-I'm thinking 5 years?).

I'm aware that we would need to start saving at some point so we have a deposit too...(how we would do that if we are overpaying, I don't know!)

Lots to think about. I suppose I would like to ask is am I on the right lines on how I plan to go about paying off the mortgage?
Is there something I haven't thought about? Should I be thinking differently?

Would appreciate any opinions or advice.
Thanks for reading

Thrugelmir

Have you asked Halifax if there any cheaper mortgage (interest) options open to you?

Don't concern yourself as to whether the overpayments are small or large. The benefit will come from the saving of interest in the longer term, from the the compounding of the interest saved. So anything you can pay off in a month will help chip away at the balance.

R_P_W

By overpaying you will bring down the balance owed quicker. So if you overpaid say 10k over the next 5 years, assuming your house value remains flat then you have effectively built 10k equity which when you sell will form part of your deposit.

Overpaying can be great especially if you are paying a higher interest rate. But you probably try and build a cash buffer of savings first to cushion the blow of unexpected expenses or unemployment.

Wh05apk

You will not be able to remortgage elsewhere if you are currently about 100% LTV, at Thrugelmir says, you can approx. Halifax, either directly or through a broker, and they will be able to switch you to a lower rate.

With regards over paying the mortgage, or building savings, your best option (once you have some savings as an emergency fund) would be to overpay the mortgage, as you will not get such a good return on your savings.

GM11

i woudnt worry too much, alot is likely to happen with house prices in the next year or two. the estimation of value is just that, a house is worth what people will pay. Have a look at ZOOPLA and see what other places are being SOLD for in your area, and get 3-4 EA's round to give you a valuation. This is more likely to give you an indication what your property will fetch, although with EA's i would auto deduct 5% from there valuation

purply

Thanks for your replies. It really helps us to sort through the possible options (or lack of!)

GM11-I had a look at Zoopla at sold prices and OMG!!!! Sold prices show £20k less than the bank estimated!!
But then I put some more details in regarding our house and it estimated the value as £86k so not sure what that means!

Just to clarify, our mortgage is with Santander (who have not reduced their SVR since we've been with them) and yes we are not able to remortgage elsewhere due to the negative equity.

Think we may have to increase the overpayments sooner rather than later in the knowledge that any overpayments we make will be chipping away at the balance.
In the first instance, we will speak to Santander and start making overpayments of £100 a month and hopefully increase that as our childcare fees reduce.