Borrow more or less

Valdo77

Hi,

Seems like a no-brainer but thought I'd check with those with more wisdom than me!

Currently moving house. If we use some savings, about £20k, we can bring the LTV down to 60% and get a better mortgage product. The one we're looking at would be a HSBC Lifetime Tracker 1.5% above BoE.

Alternatively, we can keep the money in the bank or invest and the product we'd have, also a Lifetime Tracker, would be 1.79%.

For some reason, though it seems a no-brainer and we can afford to put £20k in and still have money to do various projects we'll want to do in the new house, I am hesitant - I think I've probably got used to having the money in the bank and feel uncomfortable that it won't be there.

ed67812

All depends on the actual figures involved.

The total amount of the mortgage is key. For all we know the house could be 2million and the 20k makes the difference between a 61 or 60pc loan to value. Equally it could be a 100k house and the 20k makes the difference between an 80 or 60pc loan to value.

In the first example, the saving of the lower rate would be about 0.29% of 1.2million. 0.29 being the difference between the two rates and 1.2million being 60pc of the 2million house. This saving would be about 3.5k in the first year. (this calculation is overly simple but gives the idea).

In the second example, where 60pc of the 100k house is 60k, the saving in the first year would be less than a couple of hundred quid.

LplateSaver

Keep it in savings! The Santander 123 account pays 3% on balances up to 20k. Even if you pay tax on that youre still earning more than you'd gain by overpaying the mortgage. Alteratively theres 4% and 5% accounts to split the money between.