Lump off mortgage or in savings

Guru86

Good afternoon

I currently have our house up for sale. We have an outstanding mortgage of £69900 with a hopeful sale price of £75000.

Over the past year I have been putting money in a regular saver and will have approx £1450 at the end of the month when it ends.

I do have savings for fees and will be using that along with equity from house sale for deposit for the next house.

I am just looking for advice as to whether to pay the lump off the mortgage or place it in the savings? Will it look better if lower mortgage balance?

Thank you

veryintrigued

https://forums.moneysavingexpert.com/discussion/5189797

Guru86

Thanks for that link but this relates to long term goals. I am looking more in short turn due to selling/buying a house.

Thanks

bolzano

Have a look at the loan to value for your next house. If you can get in to a cheaper band it will likely be very worthwhile putting it as deposit for your next house.

Make sure you have an 'emergency fund' of 3 to 6 months outgoings in readily available cash. (High interest current accounts).

Before you overpay on your mortgage, double check you don't have any early repayment fees which would kick in.

Subject to the above, compare how much you could get on the money in high interest current accounts / regular savers compared to the rate on your current mortgage, and stick it in the highest.

jimjames

Guru86 wrote: »

I am just looking for advice as to whether to pay the lump off the mortgage or place it in the savings? Will it look better if lower mortgage balance?

Thank you

Once you've bought the house how much other savings will you have? If it's zero or close to it then I'd just keep it as savings and ideally build it up too so you have a decent emergency fund.

enthusiasticsaver

I agree with Jimjames above in that if you do not have any other savings I would keep this aside. You may need money upfront for mortgage valuations, solicitors searches etc etc or urgent remedial works which are brought up by a survey on your property when you find a buyer.


The only things mortgage providers look at is loan to value (what percentage of the new house will you be borrowing compared to the sale price?) and affordability - ie your annual income less outgoings compared to mortgage payment although it is usually done on multiples of your annual salary.


As you have not yet accepted an offer for your house you may not in fact get £75000 for it. That seems quite low, where do you live? Have you got 3 valuations?

Guru86

That's great thanks for all your help.

The great north east low house prices all ready lost 12 grand from house value when we bought in 2007

kangoora

Guru86 wrote: »

That's great thanks for all your help.

The great north east low house prices all ready lost 12 grand from house value when we bought in 2007

I know the feeling, lost a few thousand on my first house and this one we bought 10 years ago has gone up all of £30k on our £130k purchase price.

On the plus side, at least houses are cheap to buy up here but personally I'd welcome some rampant house inflation over the next 5-6 years

Thrugelmir

What interest rate are you paying on your mortgage?

Guru86

Its 4.49% with bank of Ireland. I have opened a tsb account and will Max it out think its better in short term