Add lump sum to mortgage or as deposit on new mortgage?

laaah

Hi

I have a mortgage of £177k with about £60k equity in the property. I have a lump sum of around £25k that I'd like to pay into it and then take out a new fixed deal to reduce the rate I'm paying. (My fixed rate term has ended so I won't be penalised for any overpayments made).

However, I would like to buy a larger property in the next year. As I intend to take out a new fixed deal on my existing mortgage ASAP to reduce my rate now, I understand that the purchase would require a new mortgage to cover the additional amount, with my existing portable mortgage running alongside it. (This would only be my second house purchase so I'm not very clear on how this process works).

My questions are:

1 - Should I pay the £25k into my existing mortgage to reduce payments now, or wait until I'm ready to move and then use the £25 as a deposit on the second mortgage?

2 - Do I need a deposit on the second mortgage since I've got equity in my existing property or does the equity act as a deposit?

3 - Does the second mortgage need to be with the same provider as the first mortgage?

Many thanks to anyone who can advise me or point me in the right direction.

laaah

Any advice would be greatly appreciated please! ��

Thrugelmir

laaah wrote: »

1 - Should I pay the £25k into my existing mortgage to reduce payments now, or wait until I'm ready to move and then use the £25 as a deposit on the second mortgage?

2 - Do I need a deposit on the second mortgage since I've got equity in my existing property or does the equity act as a deposit?

3 - Does the second mortgage need to be with the same provider as the first mortgage?

1. Overpaying the mortgage now is the right thing to do.

2. In selling your existing property a deposit will be lodged that can be used to fund a deposit on the property you are purchasing.

3. Yes. It won't be a mortgage but a second product i.e. you'll have 2 sub accounts against the mortgage.

getmore4less

If thinking of moving you need to look carefully at any tie in that restricts options on the lender choices due to ERC and what if they say sorry you can't port.


Choose your lender carefully or delay till you move.

what rate are you on and looking to move to

dimbo61

The new MMR rules are now in force and many people are facing delays in getting a mortgage sorted.
If you are on the SVR of your mortgage lender and paying what 3.99/4.99% then if you can pay off the £25K lump sum now ! You could also ask for your mortgage payments to remain static at the same amount you are paying now ( you are paying SVR now?)
By doing this you are overpaying the mortgage each month but will notice no difference in standard of living.
If you tie yourself into a new fix with your lender they may refuse a new bigger mortgage next year ( think MMR ) but this depends on income, age, deposit, credit history, etc
For now I would overpay every penny I could afford.
If you next home is going to cost say £250,000 and you need a £150,000 mortgage at say 4% use " whatsthecost " to work out how much this would cost each month and set up your mortgage payments to cover this NOW
You are overpaying so building up equity and proving to yourself that you can afford the bigger mortgage.

Gonzo33

Personally I would pay the 25k off of my mortgage with a lender that will allow me to borrow what I need to borrow for my next move (MMR already in place for all lenders) and also allow me to port. Therefore no stress - better rate, better monthly repayment. When you port and top up you'll be looking at two rates, so if you go for a 3 year fixed now and move in one year go for a 2 year fixed for the top up so you can remortgage both without any penalties and lump it into one.