Mortgage Plan - Please Advise

MrSaver96

Hi,

I and my OH will be moving into our new build in May. We will be putting down a 5% deposit in the usual way. We are likely only going to be living in the property for circa 3-3.5 years. The rationale being getting the mortgage was (I) it reduced our ‘rent’ by half (ii) it was a really good deal in what we consider an up and coming area (so potentially added future value!) and (iii) because we were fed up of renting and having to rely on landlords to fix issues which they just never did!

Our Plan -

We ultimately want to remortgage this property to a HTB and then use some savings to put down as a 10-15% deposit for our “forever home” in 3-3.5 years. The equity in the property will remain there but when we remortgage to a HTB we will also need to pay off the HTB loan. In reality we will only be making small overpayments each year of around a couple thousand as our focus will be saving for a new deposit.

In reality is this possible? Obviously it is subject to affordability (which I don’t really have any concerns about). I think I may need much more equity in the property to remortgage to a HTB. Not too sure.

If it’s not likely possible, would you reccomend focusing our savings towards making overpayments each (we can do up to 10%) year aswell as building a small pot, or still focus on building a pot outside the property equity? To give you an idea, we are on (or will be on) a 5 year fix at 2.3%.

Any thoughts would be welcome. I should say this is just some ideas and we may find that we stay in the property for years and years!

Thrugelmir

Intially on the basis that you cannot obtain a higher rate than 2.3% on your savings. After making due allowance for tax if applicable. That you overpay your mortgage initially. While it's good to think longer term. You have no idea how the future will pan out. New builds are sold at a premium , as a consequence the increase in value may not be as great as you expect in the short term.

getmore4less

A little light on numbers

Presumably you mean this is on HTB and you will be wanting to remortgage to a 75% LTV BTL


If prices don't go up

You have a 5% deposit your normal mortgage if over 25years will pay off around 10% in 3-3.5 years so you need to find the other 10% to pay off the HTB

You then want 10-15% of the forever home on top

If the new forever home is say 1.5 times the cost of the one you have that's 20%-30% in current house % so a total of around 30%-40% saved up of the current house value

Your mortgage payment(if over 25y) is around 60% capital so that's means you need to be saving at least double your mortgage payment to get anywhere close to the goal probably more like 3 times in reality.


A 5y fix with a plan to move in 3-3.5 may not be so smart.

MrSaver96

Thanks for the replies. Yes BTL not HTB!

We could actually comfortably afford three times the mortgage repayment and save at the same time although the savings will undoubtedly be reduced and it would be unlikely that we would save 10% deposit for the “forever home”. That said, waiting until the 5 year fix is up means we probably could easily afford the 10% (possibly more) and also possibly pay more off the current mortgage than expected as our circumstances will be completely different in 3 years time as I will have qualified as a lawyer (I’m doing my training currently).

I think in the short term we need to re-juggle our monthly outgoings to save as much as possible from that. After that, and once we’ve moved in, we can re-visit the numbers to see what we can do. It may be that we just do the 5 year fix and then sell.