Save for new house or repay existing mortgage

uday81

Hi,
 Sorry moderators for reposting the same thread again as i accidentally posted in the wrong forum and unable to edit or move it to this forum.
Hi all,
I started my mortgage with Nationwide in 2018 and the initial borrowed amount was 157,500 on my 3-bed property at 90% LTV 2-year fixed term. At "end of term, i switched the product at 75% LTV (though I had to pay some extra amount so the LTV was at or below 75% to get the best interest rate), current outstanding amount 142,500 . There have been some changes to my circumstances as I had my 3rd child. Recently thought of moving to a 4/5 bed house.

I have some money now. 
 Which would be better, to repay my outstanding mortgage (no other debts) or save deposit for a bigger house?
If I have the option of moving to a bigger house, would I be able to release any shortfall of deposit form the current house and use it in the new property.
Do i have to give the full deposit for the new house or the bank will wait until my current property is sold all this will be considered as chain.
Thank you,
Kumar

grumiofoundation

Makes no difference to how much you can spend on a house if you the money is 'in the house' or in cash. 

If/when you move house assuming you are planning to sell your current property you will get all the equity you have in this (what you receive = Sale price - outstanding mortgage - fees). This will get sent to your solicitor and you can use all/some of this towards deposit for next property.
You can top up this deposit with extra cash if you so need to.

Example:
You owe 142500 house worth 190,000. 
Have 40,000 in cash.

Option 1 - overpay, now owe 102500. Sell house have 190,000 - 102,500 = 87500* to use as deposit.
Option 1 - don't overpay. Sell owe 190,000 - 142,500 = 47,500* to use as depsoit plus the 40,000 in cash = £87,500
* not included fees but will be same for both options. 


Only differences would come with a) how much interest will you save by overpaying? b) do you want to have access to cash in mean time? c) are there any early repayment charges on overpaying and d) (probably most important) will you spend the money if you don't overpay?

Hope have understood question you were asking?

uday81

thanks grumiofoundation,

I have made general queries with a broker to find out my eligibility and affordability. The broker after doing a budget plan confirmed that I would be eligible to afford property worth £325000 based on the equity built up and my current circumstances.

I am currently on a 5-year fixed deal at 1.49% with Nationwide and still have approximately 4 years left, so have to pay ERC at 4% of the balance. The broker also mentioned about porting the mortgage to the new property. 

To my surprise based on current LTV at xx%, the broker showed me the rate will be 2.49% with fee of £999 for my new property, which relatively is too high considering my deposit after the proceeds of the sale tend to be nearly 20%.

1. What would be the actual rate when porting in general please, as it will be topping up my current mortgage with additional amount?

2. Is it better to pay ERC and switch the lender for better rates.

thanks
uday