Remortgage - 3yr vs 5yr and deposits

Hoenir

Perhaps the question you need to answer is what else you might do with the money.  Paying down debt is a good financial discipline to follow. Life has a habit of throwing curved balls when you least expect them. 

Bucki

Hoenir said:

Perhaps the question you need to answer is what else you might do with the money.  Paying down debt is a good financial discipline to follow. Life has a habit of throwing curved balls when you least expect them. 

Thanks, for the advise.
just trying to balance with everything coming, having a child and one underway and probably need a bigger property house in few years time etc.

just trying to see through what would better route to go down for. Need to see what is the limitation of purchasing a bigger property whilst on a 3 or 5 year term etc. or is it better to do it towards end of term etc.

Hmm all these questions and worries in my head 

Newbie_John

Also you mentioned Student Loan, is it paid off? It has interest rate of 6.25%-7.3% so depending on your salary (and if you're planning to pay it off in the future) and age it may be worth paying it off rather than overpaying mortgage.

Let's say you earn £36k and your student loan is £25k - you end up paying £1422 every year and with current interest rates you'll never pay it off, until it gets written off - so this is £1422 leaving your account.. 

ACG

Ive not read all the replies as I have to run out in a mo so this may have already been answered...

If you do a 5 year fix and decide to move in 3 years, that means you have 2 choices:
1) Pay the ERC and switch to a new lender. Obviously not ideal. 
2) Keep your current product and take out additional borrowing with your current lender (assuming you need extra money). 

However the problem with 2 is that, you will have 2 different products with likely 2 different end dates. That makes it difficult to leave the lender without incurring costs unless you get lucky. And also what happens if the lender does not like the new property or will not lend to you or will not lend enough? You then end up with point 1.

Bucki

Newbie_John said:

Also you mentioned Student Loan, is it paid off? It has interest rate of 6.25%-7.3% so depending on your salary (and if you're planning to pay it off in the future) and age it may be worth paying it off rather than overpaying mortgage.

Let's say you earn £36k and your student loan is £25k - you end up paying £1422 every year and with current interest rates you'll never pay it off, until it gets written off - so this is £1422 leaving your account.. 

yes Student Loan is about 20k remaining.
they are take that out of my wage already.

i understand if i dont manage to pay off by retirement then it will be written off.  Thats what I thought.

I rather use money for mortgage cos if i end jobless the student loan will stop whereas the lender will take house away if otherwise.

Newbie_John

Bucki said:

Newbie_John said:

Also you mentioned Student Loan, is it paid off? It has interest rate of 6.25%-7.3% so depending on your salary (and if you're planning to pay it off in the future) and age it may be worth paying it off rather than overpaying mortgage.

Let's say you earn £36k and your student loan is £25k - you end up paying £1422 every year and with current interest rates you'll never pay it off, until it gets written off - so this is £1422 leaving your account.. 

yes Student Loan is about 20k remaining.
they are take that out of my wage already.

i understand if i dont manage to pay off by retirement then it will be written off.  Thats what I thought.

I rather use money for mortgage cos if i end jobless the student loan will stop whereas the lender will take house away if otherwise.

It really depends when you took your student loan, it could be 25 years, it could be retirement.
 Sure, it will be written off but in the example I gave you can see that the person is just paying the interests about £1500 a year, that is £37k for period of 25 years - on £25k loan - loan never gets paid and is eventually written off.. but the person still ended up paying £37k.

If you're worried about losing job, then keep the savings and don't overpay your student loan nor the mortgage.

But if you really want to find the best approach for your savings you need to understand how much your student loan costs you - as it could be that you earn £250 of interests on your savings but in the same month you're paying £300 student loan - and not actually paying it off, just some interests and it could be growing.

It is really up to you, you need to look at numbers, how much these products cost you monthly:
5.5% saving account (-20% possible tax = 4.4%)
4.9% mortgage
7.3% student loan

***Regarding tax on your interests, if you earn less than £10k in interests then it's automatically taken from your salary as a higher tax