Repayment mortgage help & advice

fratton123

Please can you help, I need advice. I have a low mortgage of £13,00 and had 9 years left to pay it. I'm a single mother of two and I work part time. My repayments are £130 per month. Which are manageable for me. Also with my mortgage is a ''reserve'' that I can have access to of £12,000 which is there if I need to you it. I have, and I'm currently in it by £5,000.

Speaking to my Family at the week end suggested that I overpay my mortgage to get it paid up quicker.

I spoke to my mortgage provided and they said that If I overpaid £100 per month it would reduce it to 5 years and 3 months. and in that time I would have to pay off the 'reserve'' amount.

I have gone with this deal today (I can easily get back out of this in one months time)

I'm also thinking that if I have finished my mortgage then I won't have any £12,000 reserve (like overdraft facility) to fall back on and would only rely on my earnings which are most of the time more going out than coming in. the interest on the reserve is 0.42% (£15.00 per month on borrowing £3,500 atm )

I'm thinking that I should pay it off over 9 years now as I have the security of this Reserve money.
The adviser said that after the 5 years 3 months if I still owe the reserve money then he can convert into a long term extension etc. I really don't know what to do for the best.

Please can someone with experience help. thanks AJ:D

MallyGirl

but don't forget that is 0.42% interest per month so just over 5% per year so it is low but not super low.
Can you get over 5% net interest on that same money anywhere else - you just might if you are a non tax payer with the right current account but it is unlikely.

fratton123

Hi Mallygirl, Yes it is is monthly charge at 0.42 %
I don't thik I would get a deal to borrow that much for that % per month. x:D

MallyGirl wrote: »

but don't forget that is 0.42% interest per month so just over 5% per year so it is low but not super low.
Can you get over 5% net interest on that same money anywhere else - you just might if you are a non tax payer with the right current account but it is unlikely.

ViolaLass

I think you should use that £100 a month to build up some emergency savings first.

littlegreenpeas

Hi
I agree with ViolaLass if you have an emergency fund you wouldn't need the £12k safety net. I am not saying save that much but it is good to have a reserve where you don't need to ask anyone else for help.


Good Luck


LGP

getmore4less

is this with Barclays Woolwich?
(unless the T&C's have changed since I last checked)

If it is you have to be very careful using the reserve, the interest rolls up(into the mortgage) and the normal payments do not cover it.

What's the rate on the mortgage?

Usually best to pay down the reserve first as it is at higher rate.

fratton123

Hi yes it is with Woolwich. I'm on a tracker rate following the base rate & my mortgage is at 2.49% ( I think this is right) this is what they told me on the phone.
For the reserve I pay 0.42% per month on the money I borrow. So the interest on the reserve is 0.42% I pay £15.00 per month borrowing £3,500 at the moment)

I think that this is very good as if I got a loan for that amount it can be a couple of hundred per month to pay it back.

They said that there will be opportunities when the mortgage finished - but I'm worried that if I need to dip in to any money I will be paying more than my mortgage repayment was per month.

I really don't know what to do Confused.

Thanks to everyone for your help

getmore4less wrote: »

is this with Barclays Woolwich?
(unless the T&C's have changed since I last checked)

If it is you have to be very careful using the reserve, the interest rolls up(into the mortgage) and the normal payments do not cover it.

What's the rate on the mortgage?

Usually best to pay down the reserve first as it is at higher rate.

ViolaLass

fratton123 wrote: »

They said that there will be opportunities when the mortgage finished - but I'm worried that if I need to dip in to any money I will be paying more than my mortgage repayment was per month.

I really don't know what to do Confused.

Thanks to everyone for your help

Which is why you need to build up an emergency fund.

getmore4less

Pay any excess into the reserve to bring it down it is costing you more than the mortgage.

Reducing the mortgage term over paying down the reserve is a very bad idea.