Forward planning with the mortgage...

Kerreh

Hello First post here so I'm hoping I've put this in the 'right' part of the forum.

A little background: I'm 34 and after living with my parents whilst saving bought my first home (a one bed flat, 33 sq m in total!) for £119,000 in summer 2016 (I did my homework and for the area I live this is reasonable).

I have a mortgage (currently with Leeds BS, went through an independent broker) with 85% LTV, fixed for 2 years @ 2.40% with the fix due to come to an end around July 2018. The mortgage is for a term of 34 years.

My home isn't big enough - I knew this when I bought it but it's all part of my master plan :rotfl: I want to stay here another 6-7 years and save and then look to move to a bigger place (reasonable dreams here... I'd love to have kitchen separate to my living room and possibly a second bedroom).

The question being... the money that I save (I estimate around £30k in 7 years providing no job loss etc!) should I:
a) pay down my existing mortgage quicker and when I go to move increase the size of the mortgage lending at that time or
b) keep it as savings and when I come to move keep the mortgage lending amount the same and use the savings as extra capital

I get that it's better to pay off debt than savings given interest rates and yet still.. I don't know which way to go with this Any input would be gratefully received :j

ACG

If you can get a higher rate on the savings bang it in a savings account. If not then in theory it would be better to pay down the Mortgage.

However, with it being 33sqm, you might find a potential buyer struggles to get a mortgage and/or you struggle to find a buyer full stop. So I think I would be more inclined to put the money in to a savings account, just to give you more options should something like that happen.

I have seen properties that size given a nil value by the surveyor despite it fitting the lenders criteria.

Kerreh

Yeah I'd been doing some research into the Private rental sector (for work) and had very recently had the realisation re: the size of my place... a bridge to cross another day methinks!

Thanks for the input.. I think I'm going to go the savings route :j

enthusiasticsaver

I am not sure I agree that saving £30k at pitiful rates unless you are using high interest current accounts and regular savers is the way to go. You are on a long term mortgage so your repayment is probably not reducing the mortgage that much. Most lenders allow overpayments up to 10% so I would be inclined to overpay and save a proportion towards moving costs. That means in July your LTV will be lower so you are more likely to get a better rate than 2.4%. Then may be the time to save instead.