Increase equity vs. saving

mvarrier

Apologies if covered elsewhere and for being similar to an earlier question I posted (although definitely different).

We want to buy an additional property in five years without selling our current one. At present we owe £150,000 and it is valued at £350-80k. Mortgage good at present- is a hsbc tracker (base rate +1.5%) repayment.

We have 30k savings essentially earning the same interest that we pay on the mortgage.

Would we be in a better position to buy in five years if we saved 1k per month or overpayed the mortgage the same amount (money we would then likely need to re-borrow) or does it not matter at all?

Thanks!

kingstreet

As additional equity in your current home is useless in purchasing another property unless you decide to remortgage it; saving the money to increase your deposit for the second property appears the more sensible option.

The same could be achieved if you have an offset mortgage?

mvarrier

Remortgaging is what I am proposing. We would have to transfer the remaking balance to a buy to let mortgage anyway.

I don't think I could get as good a deal on an offset mortgage. I'm not of a mind to go for a fixed rate and the costs involved in switching are not insignificant.

Thrugelmir

Impossible to make investment decisions 5 years in advance. Personally I focus on now rather than then. So much could change in the intervening period. Not least both interest rates and house prices.

kingstreet

mvarrier wrote: »

Remortgaging is what I am proposing. We would have to transfer the remaking balance to a buy to let mortgage anyway.

I don't think I could get as good a deal on an offset mortgage. I'm not of a mind to go for a fixed rate and the costs involved in switching are not insignificant.

So you intend to let the current property? Any particular reason you didn't mention that?

You do not have to remortgage to a BTL if your current lender will permit consent to let on the current mortgage.