Mortgage free in 10 years!

Amanda_Cm

Hello,
We just completed last week on the purchase of our first home. We got 4 bed semi detached that need modernisation. Partner is in the construction business so we are hoping to increase value when is time to remortgage in 2 years. We are starting of 151k
Don't know if is worth it to overpay as well for those first 2 years or save the money and add it as a deposit when we remortgage. What do you guys think?

Smodlet

Hello again. I would strongly recommend overpaying. How much interest can your savings earn compared to how much you are paying your lender? If you can do better with savings, please point me in the direction of that account.

What if your partner or you were suddenly unable to work? The more you have overpaid your mortgage, the longer it will be before you have to worry about getting behind with it.

When the time comes to sell, the smaller your outstanding mortgage, the more equity you will have for a deposit on your next home so it is unlikely you will lose out by overpaying rather than saving.

You do, of course, need an emergency fund of at least £1k for things like replacing appliances/unforeseen repairs etc. although, with an OH as handy as yours, that is less of a concern for you than for most. I expect he would get "mates' rates" even for work he could not do himself since he works in construction.

HTH.

louloubelle79

All the best; I warn you this forum is addictive :beer:

gallygirl

I disagree with Smodlet, whilst agreeing with the general points.

As OH is in the construction industry can he be laid off in bad weather? In which case you'd need much more than a 1k emergency fund.

A lot of lenders (if not most/all?) don't treat overpayments as 'payments in advance' so wouldn't allow you to not pay for a few months without classing you as being in default. (They may however let you claim the overpayments back.)

What is your mortgage rate? It should be easy to beat it with the top regular savers and interest paying current accounts.

I would suggest you build up a sizeable emergency fund (using the savings/current accounts) and then build up savings before you remortgage. It will make no difference if you have a 145k mortgage and 15k lump sum to pay off in two years time or a 130k mortgage, you'll be offered the same LTV. It might even be that you don't need all of your savings to get a better rate so could put some towards home improvements - not an option if you have overpaid unless you remortgage for a higher amount.

Whatever you choose, the important thing is to be mindful of your spending and safeguard your home and future. Welcome - as louloubelle says, this place is addictive .

pennystretcher

OP unless you have accounts/investments where interest is more than on your mortgage.
ps when you remortgage you don't need to submit a new deposit. They will take what you owe in mortgage and do you a deal on that amount versus the value of property, so your LTV will go down as much as you have paid if valuation is same as when you first applied.