Advice: should I use my savings to reduce my mortgage debt?

Faxanadu

Hi there, I was hoping to get some impartial advice from other users beyond what my bank has advised me to do.

Next month I will end my 2 year fixed term rate on my mortgage and need to remortgage to avoid being put on Standard Variable Rate.

I currently owe 167K and have 20K in savings.

Would anyone recommend I put all or part of these savings into my mortgage as a repayment, in order to reduce the I amount I’d have to pay back and therefore secure a better interest rate and reduce the interest I would owe?

Or should I keep these savings for a rainy day or look to invest into something else, as any gain from my mortgage repayment would be minimal?

Torn. :mad:

Thank you in advance to anyone who is able to assist or has been in a similar situation.

Thrugelmir

There's not a neccessity to remortgage. Firstly find out what your existing lender will offer you in terms of a new product. Then you'll have something to compare to the wider market. Remember remortgaging to a new lender lender may incur considerable costs.

Faxanadu

Thank you for taking the time to reply and good advice!

dimbo61

Go on your existing lenders website and see what offers they have for existing customers.
they can do a desk top valuation of your home and say what the LTV is
Now if some of the £20K will get you to a better LTV then consider pumping some of your savings into the mortgage

Retired_Mortgage_Adviser

The following information would help with giving slightly more tailored views -

1. Current interest rate
2. LTV when you took out this fix.
3. Current value of home (conservatively)
4. In your assessment of your overall circumstances, of the 20k in savings, what is the minimum amount you need to keep aside for something going wrong (losing your job, unexpected large expense, etc)

Couple of points to consider when making a decision to overpay -

1. How much do you want to retain as a rainy-day fund which you can access with relative ease if needed?

2. What is the LTV that you are on currently? Will your savings mean a change in LTV bands which reduces the interest rate significantly? For instance if you are currently on 90/95% and an overpayment can take you 1-2 LTV bands lower, that might mean something. However, if you are already on (say) 60% LTV, there might not be a lot of room for lower interest rates.

3. Always be careful when you are talking about "investing" as a alternative to overpaying your mortgage. Overpaying your mortgage has an immediate, guaranteed and no-risk return. So, from a like-for-like point of view, anything you compare it with should have similar attributes - for example FSCS protected savings, deposits, etc. This is not to say that some people don't consider avenues like P2P savings, S&S ISAs, etc but you need to be clear eyed about the additional risk.

Faxanadu wrote: »

Hi there, I was hoping to get some impartial advice from other users beyond what my bank has advised me to do.

Next month I will end my 2 year fixed term rate on my mortgage and need to remortgage to avoid being put on Standard Variable Rate.

I currently owe 167K and have 20K in savings.

Would anyone recommend I put all or part of these savings into my mortgage as a repayment, in order to reduce the I amount I’d have to pay back and therefore secure a better interest rate and reduce the interest I would owe?

Or should I keep these savings for a rainy day or look to invest into something else, as any gain from my mortgage repayment would be minimal?

Torn. :mad:

Thank you in advance to anyone who is able to assist or has been in a similar situation.