Using savings to reduce mortgage prior to switching products

Rob__71

Hi,

My fixed rate ends at the end of January 2023 so I've applied for a product switch with my current lender (Barclays). Unsurprisingly, the new rate is more than double of my existing rate and the new mortgage will cost me roughly £80 more per month.

I owe just over £70k (this will be down to approx £68.5k by the end of January) but I have 5k in savings.  My question therefore is, is it best to pay the 5k off my mortgage prior to switching product to bring the monthly payments, as well as the balance, down?  I do appreciate however, it would take me over 5 years to build the 5k savings back up at a rate of £80 per month which is what would be saved on the mortgage per month.

I will be in a position to pay off my mortgage in 4 years' time so have gone for a 5 year fixed rate and will pay off the mortgage when the 5 year deal ends.

This is my first post so I hope it all makes sense??

Fromdownwest

Please do not take this the wrong way, however, if you are worrying about an £80 increase in your mortgage, then I would not be getting rid of a £5k nest egg. 

That is the equivalent of 62 months payment increase (excluding any interest)

Also, 5 year fixed rates are priced horribly at the minute? Did you take advice on this?

mi-key

I agree, I think it may be better to keep the £5K as a rain day fund. With a lot of mortgages you can overpay by 10% each year, so maybe at the end of the first year, pay of £960 from your savings to cover the increase, and do the same each year after that?

If you do pay the £5K off the mortgage balance, it won't make that much of a difference to your monthly payments

At least that way you get the best of both worlds as your increase isnt really making you pay more, and you still have the savings just in case? 

Rob__71

Fromdownwest said:

Please do not take this the wrong way, however, if you are worrying about an £80 increase in your mortgage, then I would not be getting rid of a £5k nest egg. 

That is the equivalent of 62 months payment increase (excluding any interest)

Also, 5 year fixed rates are priced horribly at the minute? Did you take advice on this?

No, I haven't taken advice. I've always arranged my own mortgages but this time feel a little bit let down by my current lender as they took over a week to reply to me regarding applying for a product switch which would have only cost an extra £30 per month, then, funnily enough they replied a day after that product was pulled.   I've applied for a 4.89% fixed rate (my current rate is 2.09%).  On saying I've applied, yet again Barclay's have failed to reply to me/send the documents in the time they stated they would so who knows if I've actually secured that rate??

housebuyer143

Rob__71 said:

Fromdownwest said:

Please do not take this the wrong way, however, if you are worrying about an £80 increase in your mortgage, then I would not be getting rid of a £5k nest egg. 

That is the equivalent of 62 months payment increase (excluding any interest)

Also, 5 year fixed rates are priced horribly at the minute? Did you take advice on this?

No, I haven't taken advice. I've always arranged my own mortgages but this time feel a little bit let down by my current lender as they took over a week to reply to me regarding applying for a product switch which would have only cost an extra £30 per month, then, funnily enough they replied a day after that product was pulled.   I've applied for a 4.89% fixed rate (my current rate is 2.09%).  On saying I've applied, yet again Barclay's have failed to reply to me/send the documents in the time they stated they would so who knows if I've actually secured that rate??

Barclays are suffering huge huge delays. If you want the deal you are best to get a broker to apply for you to skip the queues. You can get a free one to do the product switch 

Fromdownwest

Rob__71 said:

Fromdownwest said:

Please do not take this the wrong way, however, if you are worrying about an £80 increase in your mortgage, then I would not be getting rid of a £5k nest egg. 

That is the equivalent of 62 months payment increase (excluding any interest)

Also, 5 year fixed rates are priced horribly at the minute? Did you take advice on this?

No, I haven't taken advice. I've always arranged my own mortgages but this time feel a little bit let down by my current lender as they took over a week to reply to me regarding applying for a product switch which would have only cost an extra £30 per month, then, funnily enough they replied a day after that product was pulled.   I've applied for a 4.89% fixed rate (my current rate is 2.09%).  On saying I've applied, yet again Barclay's have failed to reply to me/send the documents in the time they stated they would so who knows if I've actually secured that rate??

I think in the current climate a broker would be well worth your time.

matt1983

Can anyone recommend a really good, reliable and free mortgage broker?

tripled

matt1983 said:

Can anyone recommend a really good, reliable and free mortgage broker?

No such thing really. If circumstances are relatively straight-forward, any with reasonably decent reviews. If they are more complex, you may benefit from paying a specialist broker.

I made the mistake of using L&C for a remortgage, as a contractor, their back-office teams didn't grasp the documentation the lender wanted, which caused a lot of stress and delay (and nearly resulted in the mortgage falling through), compounded by their back-office struggling to cope with the volume of work they took on after the mini-budget. I regret not paying for a specialist, the one we used when we took out the original mortgage wan't cheap but completely stress-free.

simon_or

matt1983 said:

Can anyone recommend a really good, reliable and free mortgage broker?

My independent broker charges for adverse customers but not for normal. She's whole of market and absolutely great with all kinds of income (I have salary, rental and limited company income and in the past also had really bad adverse), one single point of contact all through the process and is always responsive.