Mortgage-taking more than you need- disagreement!

ni_bride2b

Hi all,

My husband and I are in a disagreement so I would like to prove I am right ��

We have received confirmation of a mortgage of £145,000 for a £195,000 house. In a wonderful turn of events our current house has exceeded all expectations and we have earned £20,000 more than we expected selling it. Essentially that means we don’t need the £145000 mortgage and could get by with £125,000. Plus I have saved about £12,000 to begin to cover the costs of new furniture. My husband thinks take the bigger mortgage, and sure we overpay what we don’t want in the first year (we can over pay 10% of the loan without fee). But is it true that we will be paying interest on what we pay back, so essentially it’s not worth while keeping the money now because we ‘might’ need it, and instead taking only what we need and finding other ways to manage (ie interest free furniture loans, waiting a while and saving up). His other suggestion was we put it into saving accounts for university, again is it not expensive savings?!

Essentially, are we going to pay the 2.31% interest on the extra mortgage we take? Is it not ‘bonus money’ like he says?! Help!

Thanks,
Ni

amnblog

If he has any brains he will do what you tell him.

SpiderLegs

If that’s his thinking then I’m not sure if university is really worth saving for!

Farmerbob

Just consider if taking the lower loan gives preferential rates depending on the LTV, personally if it’s the same rate at both loan amounts and you’re disciplined to overpay at some point then at least you’ll have spare funds in case any costs run over then make overpayments with any left.

HampshireH

You may get a better rate on less and will pay less interest overall if you borrow less.

No brainer to me. He is looking short term not the bigger picture.

If you really need to convince him see what rate difference you could get (likely to be fracional but possible) and how much over your term that costs.

Short term wins. Look at monthly payments & the difference. Put it on paper for him v £20 k spending money.

No point having more debt if you can afford not to.

getmore4less

75%ltv use some to get a better rate.

There are savings rates more than the mortgage rate save some.

Don't spend 12k on furniture.

ni_bride2b

Thanks everyone for the feedback! It has raised further ideas for me, always useful :rotfl:

I have checked and the LTV doesn’t reduce the rate with the bank we have the agreement with, and we need to push forward with it so I don’t want to look into other lenders at this stage. So essentially not really a major game changer, although we’d be paying £80 less per month if we take less money.

I wonder could we get a personal loan if we needed more money, we probably will change the kitchen and bathroom at some stage. I have looked and a credit union will offer 12.5% APR on a loan approx, is that % comparable to the 2.31% mortgage rate or is that a completely different percentage?

I didn’t consider putting the extra money into a savings account! 🧐 Would that be an isa or a regular saver? Ignore my ignorance, so if a savings account offers 3% is that a better rate than the mortgage that’s 2.31? 🙈

Thanks, not sure how to quote anyone but yes to the person who noted his need for brains

ni_bride2b

getmore4less wrote: »

75%ltv use some to get a better rate.

There are savings rates more than the mortgage rate save some.

Don't spend 12k on furniture.

It’s amazing how much the furniture we need seems to cost, will quickly add up!

Nebulous2

Are you a saver and him a spender?

You referred to the fact that you saved the money for furniture. Does he have something he would like to buy?

Putting it in the mortgage helps secure your future by getting you closer to being mortgage free.

Putting it in savings may get you some interest, but as it is easier to access may well see it whittle away with very little to show for it.

You could of course compromise, it doesn't need to be completely one or the other. You could put £10k in the mortgage and £10k in savings, or £15k / £5k.