Pay off the mortgage or ride the storm?

f1_Fan

Hi all,

After some advice on what I should do. I own 50% share of a £400,000 property which I purchased 2 years ago. My mortgage is coming to an end in April and looking at the market and the forecast that rates will continue to rise this year, I'm thinking to pay off my mortgage on the 50% share I own with savings I have (have no ERC as it's coming to an end in April). I was hoping to put the savings towards stair-casing to 100% but with the mortgage rates not looking like they'll fall for 2 years or so, I'm keen to put this off.

I have most of my savings (100k+) in S&S but again with the market, I'm not doing so well with this.. so I'm thinking my best bet to put all this into the 50% and be mortgage free while the market (hopefully) stabilises and thus saving around £550-£600 a month. With the best tracker I could get at the moment is 3.74% (I really don't want to go into a fixed rate.) 

I suppose it's one of those head/heart decisions. Anyone have any experience, anything I should know/tips or going through the same ?

Much appreciated for any replies.

cheers,

L9XSS

My view pay it off, then start to rebuild your savings.

jrawle

How much rent are you paying on the 50% you don't own? Also, how large is your mortgage? You need to work out whether you will save more money by reducing the rent you pay by buying a larger share of the house, or by paying off the mortgage (you will need to look at various scenarios with different possible interest rates). It's impossible for anyone to advise without all the figures.

se2020

There are some savings accounts paying more than 3.74% so if you can remortgage at that you would be better off keeping the savings. 

jrawle

se2020 said:

There are some savings accounts paying more than 3.74% so if you can remortgage at that you would be better off keeping the savings. 

That would be true in the case of a 100% owned property. In this instance, it's a shared ownership property with rent payable on the 50% not owned, so there are actually three options, one of which is to "staircase", i.e. buy part of the property the OP doesn't already own, and thereby pay less rent. It's impossible to say which it best without having all the figures.

dimbo61

You can't sell 50% of a house 
So you should consider buying the other 50%
Check what rates you can get and what lenders will lend you.
Hopefully  with the equity already built up and the £100,000+ money tied up in the S and S you should have an excellent LTV

f1_Fan

thanks for the responses. Sorry, I didn't provide figures.

I pay £220 rent on the 50% I don't own. Currently mortgage payment is £631 with 153k to pay off.

I was originally looking at staircasing to 100% but with the mortgage rates, I would still be paying off the mortgage on the 50% I own (which has 153k to pay off), so that would be looking at repayments of at least £800 and then if I put in all of my savings which is around 150k for the staircase, I would still be paying the mortgage of 50k at ballpark figure of £250 a month.

dimbo61

I would look to the long term.
You have a good savings pot but also have a large mortgage and that's for 50% of your home.
Long term owning you own home is a great way to prepare for retirement !
No mortgage or rent to pay in your old age.
Can you afford a £203K mortgage ? 
Did you build up the £150K savings pot over the last few years from spare income ?

f1_Fan

Right now, owning 100% is not a priority and the thought of paying off the mortgage on the 50% and thus saving £600+ a month seems logical. Over the 2 years I could save a huge amounts and by then I could staircase to 100% and the market will hopefully be in a lot better state. If not, I suppose I would have time on my hand with it. 

I could, looking at what I've been given, the mortgage would be around £1200 minus the £200 I would save from rent. 
Yes, spare income.

many thanks,