Mortgage, move & savings question...

gax23

Sorry for the vague and generic title, but I really can't think of a way of summing this question up easily...

We're in the process of moving house (not quite at exchange, but chain complete, surveys done, mortgages arranged all along the line, searches currently being carried out). The move isn't expected to take place until October at the earliest, due to people above us in the chain buying a new build which doesn't even have the roof on it yet.

We have 89k on our current mortgage and a decent savings pot. We need to keep hold of the bulk of this (as per Martin's advice!) as we're both self-employed and have a young child.

We're keeping the mortgage low on our new place (compared to purchase price) and will be putting in 20k of our own cash towards the transaction. This is basically covering the solicitors' fees, estate agent fees, SDLT etc etc rather than putting it on the mortgage (again, Martin's advice).

Now, our fixed term on our existing mortgage has just ended. Until the move goes through, we're on their standard variable rate of about 4.79%. Yes, I know...

My question is this. If we're putting 20k cash into the transaction anyway, would it not be prudent to throw that 20k at the mortgage right now, and lowering our interest outlay on the existing mortgage? When completion happens we'll have 20k more equity in the house and therefore our cash will be 'returned' to us and the net effect on the balance sheet (for want of a better word) will be the same, with the bonus that we'll have paid less mortgage interest.

Am I missing something vital, or would you say that's a good idea?

Thrugelmir

Your solicitor will require these funds to complete the financial side of the transaction. There's no harm in using the money to reduce your existing mortgage now. As you say any excess funds will be passed back to you.

With a variable SVR at that level. Worth overpaying by whatever you can afford in the interim period.

gax23

Thrugelmir wrote: »

Your solicitor will require these funds to complete the financial side of the transaction. There's no harm in using the money to reduce your existing mortgage now. As you say any excess funds will be passed back to you.

With a variable SVR at that level. Worth overpaying by whatever you can afford in the interim period.

Yep — the funds will still be there as they'll be given back to us in the form of equity once the mortgage is redeemed.

Worth adding too that this isn't our whole savings pot — there's the same amount again that could be used for the solicitor's funds if they're taken before the mortgage is redeemed.