Remortgage question and what to do with lump sum.

JimmyTheWig

spadoosh wrote: »

What to do with the money depends on your current situation. Are the improvements due anyway? Is there anything set aside for those inprovements? Do you have an emergency fund?

Remortgaging will depend on what you choose to do. If you remortgage with the same bank youll tend to find its a pretty straightforward thing. Theyll work out how much youve paid and youll have a new LTV (likely) based on your purchase price. IF you think the property has increased a considerable amount in that time you can ask for the property to be revalued (costs can be involved) and they will reassess on the new value. If you go with a new provider, it will be a similar process to when you bought the property (minus all the house buying things).

A side note. People really do tend to have a habit of overstating there house worth, either through some optimistic hope, unrealistic expectation or sheer delusion. Its always helpful to be as prudent as you can be, mitigates troubles later on. Theres also a misconception that certain works add value. The reality is certain works need to be done to maintain value. So whilst you might need a new boiler and your house is worth £xx amoutn it will not suddenly be worth £2-3k extra because youve had the boiler replaced. If your bathroom needs replacing it means your house probably wouldve sold less than the 'market value' as opposed to youve just spent £5k on a new bathroom, so add that to the property value.

I agree with all of the above.

But this...

A good bulk of your current mortgage will be made up of interest owed. At the moment you say youre on a higher rate so a good portion of what you owe is say 5% worth of interest. £2,500 will not make a big impact into that. Should you come to remortgage and find you have a much better interest rate, lets say 3%, The £2,500 will have a bigger impact against that portion of interest if that makes any sense. So the £2,500 could have a bigger impact if saved correctly and offset against a cheaper interest rate. Or it could be better to over pay now. It will depend on your mortgage, the amounts, the interest and your preferences.

... unless I've misunderstood it, is completely wrong. An overpayment will come off the capital of the mortgage.


But this statement...

Steameh wrote: »

At the moment I have zero saved up, no emergency fund or anything set aside

... means I'd be shocked if the right thing wasn't to stick the money in savings as an emergency fund.