Mortgage Question: What would you do?

Gareth_Ainsworth

Hi all,

My and the partner are umm'ing and arr'ing about the best way to proceed with our mortgage. We are looking to move away in a couple of years to a more expensive area and trying to work out the best way to go about it. We'd welcome your thoughts.

We currently have £128,000 left from an initial £141,000 on our mortgage (House worth approx £185,000+). We are on a fixed rate until December 2024. We took a mortgage holiday for 3 months during initial pandemic and now pay £521 a month. We have upped this with Nationwide and they take £600 a month. We then overpay at least £120 extra a month on top, so in effect overpay by £200 a month - £2400 a year as a minimum.

We have nearly finished renovations on the entire house and this has taken most of our spare money for the past 5 years since moving in. We now have just £200 to pay off a CC.

We have been saving for the past year and we now have £18,000 saved up, this includes our emergency fund as well. Due to promotions in work and finishing paying for work on the house, we have a spare £1400 on top of the extra we pay off the mortgage each month (Our joint combined income is 60k). We are looking forward to September 2023 when we are looking to move, and if things don't change, we reckon we will have £40k-£50k saved.

Now we are trying to work out the best way to put us in the best position for when we move. Do we pay off extra from the mortgage leaving us with a lower mortgage before the move. Do we keep the money and use this, along with the equity on the house, to give us a bigger deposit? Or is there another better option? Like we say, we will be looking at a bigger mortgage as house values will be higher in this new area. (We will be looking for houses around 250k depending on what can be afforded).

What do people think TIA!

george4064

What interest rate are you paying on your existing mortgage?

Keeping it cash does allow you maintain some flexibility/accessibility with the cash, but you will most likely achieve a better ‘return’ if you were to overpay your mortgage compared to sticking it in savings accounts.

Assuming your overpayment limits is 10% per year without incurring any charges, why not do a mix and make 10% overpayments as possible and stick the rest either in premium bonds or 1y/2y fixed savings accounts?

dimbo61

You may still be in arrears with your mortgage if you took a 3 months mortgage break !
3  X £521 = £1563 and your overpaying by £200 a month.
Clear the credit card and overpay the mortgage by £500 a month.
You have about £57,000 equity at the moment plus savings.
Save, save, save and check every penny you spend while also overpaying the mortgage which will give you a better return than saving into a savings account at the moment.
Good luck in finding a new home and building a 10/15% deposit 

Gareth_Ainsworth

Thanks both for your comments. I believe the current interest rate for our mortgage is 2.19%.

We took a 3 month payment break when paying £515.56 a month (£1546.68 for the 3 months). We have overpaid £200 since the start of this year so should be £300 in the green.

10% is the maximum we can overpay on the mortgage each year. We're currently paying off the CC at £200 a month (0% CC) over next few months, then I think we will overpay the mortgage by £500 a month as suggested to make more a dent. (£6000 a year)

getmore4less

You will owe more than just the missing payment as the interest will have compounded.