Paying off mortgage

Boogo

I really hope someone can give me some advice!
I have come into some money and can now pay off my mortgage, but I wondered whether 1) To pay my current mortgage off or 2) To use the money that I have to pay for a large deposit on a house that I would not otherwise be able to get a mortgage for.
I have been told that I would not incur any penalties for early repayment as I am not in a fixed rate mortgage.

Hope this makes sense and thanks in advance.

enjoyyourshoes

Don't forget that the big new shiny house will incur costs:-

1.0 Estate agent to sell your current house

2.0 Solicitors at both ends

3.0 Stamp duty on shiny new home

4.0 removals

5.0 Just check you can transfer current mortgage to new house (Porting)

6.0 incidental- new lawn mower/fridge/cooker whatever else to fill up the larger shiny home

7.0 surveys etc

Tot them all up and it add to a pretty penny, then ascertain if that is what you want , or could all those extra costs be spent on AFRICAN SAFARI- last chance to see our defeated natural history?

Boogo

Oh It’s terribly tempting to use the savings on a grand adventure! But the property I’m currently in doesn’t meet my needs any more, so even without being able to pay off the mortgage I would be moving and incurring the mentioned costs regardless.

juniordoc

Well in the absence of having found a new house that you want to buy imminently i would pay off your mortgage for now as you can use the equity to put towards your next house and your mortgage is likely costing you more than you could make in interest in a savings account.

enjoyyourshoes

Love it or list it?

could you not add to your current home to ,make it ideal?

Boogo

It!!!8217;s the area rather than the house I want to leave. Plus I have no real outside space for my young children and no amount of remodelling can change that.
I do have some work still to do on the house though! My concern is I pay the mortgage off then the house loses value additionally the mortgage I originally took out was such a good deal that I!!!8217;d worry about losing any benefits from it.

AnotherJoe

If the mortgage rate is very low % then stick with it and put the money into interest paying accounts until you find a new house.

Since you have not posted any actual numbers its hard to see what extra advice you think people can provide, we dont know if this is a £20k, £300k or £2M mortgage.

As for house prices falling that could happen after you've bought and would affect you almost the same as paying off your mortgage now, but if you really think that will happen you should sit tight until it does, since more expensive houses will fall more than cheaper ones.

Or you could just live in a house you like rather than worrying about "what if"

Boogo

Back in 2008 I got 100% mortgage for £110000 (remember those!) with a fixed rate for 2 years so for the past 8 Years I!!!8217;ve been paying around 2.5% interest rate so now my mortgage is at about £85,000. I am in a position to pay it off. However the area I!!!8217;ve been looking to move to the property is more expensive and I can get a mortgage for £160000 but the property that would be ideal 220000! Is this more helpful?

AnotherJoe

2.5% isn't that good a mortgage rate, its a little high if anything

So I'd just pay it off now as that will give you a tax free 2.5% on £85k, for perhaps the next 12 months (if it takes you that long to move since you haven't got serious about moving yet)

And, if you delay, for say a year or two, then you get two years interest free.

Yes you are taking a chance house prices might fall but they might fall 5 minutes after you buy your £220k house. At least you'll be in a nice house you like.

wombleking

'My concern is I pay the mortgage off then the house loses value'

Not sure I understand the thrust of this point. The houses value is not tied to the mortgage amount. You're always, and have always been living with 'risk' that house loses value...?

Pay off mortgage. Look for new house. It will take 3-6 months which gives you more time to save money for all the costs mentioned above. Should be able to get a mortgage rate of 2% or less.

Peelerfart

"AFRICAN SAFARI" please no! What kind of financial advice is this? No!
Think pension, savings, investments and maybe a small,cheap holiday. Oh and a trip to the zoo, if you can afford the cost these days