Use savings for deposit or overpayment

Herzlos

How much do you think you'd need in savings to live comfortably for 1 year if you both lose your jobs?

How quickly do you think it'd take to restore that savings account?

Are the savings in an ISA?

If it's in an ISA, I'd take £20k each out of it to add to the deposit because you can restore that within a year. If it's elsewhere and you can restore it quickly enough I'd put more towards the house because you can add as much as you want to the savings.

You can always look for a mortgage without overpayment fees too.

BonaDea

You can only restore money to an ISA if it's a 'flexible ISA', and not all are.

Hoenir

SarahB16 said:

Successfully obtain a £300,000 mortgage facility and the new balance is:

£198,000 (negative) but you have the ability to draw £102,000 (up to your £300,000 facility) but you no longer have any savings and you could say you have an overdrawn current account balance of £198,000.

Offset more recently is savings based. The "facility" accounts were dealt a death blow with the Mortgage Market Review. The Virgin One Account was a great concept in it's heyday. Didn't factor in some people's inability to budget.  Resulting in messy outcomes. 

redundantmortgage

How much we'd need would depend on how much the mortgage would be as this would be the biggest chunk of our outgoings. Also aware council tax, energy bills etc. would cost more in a bigger property. I suspect we'd need more that £20k each given how much everything costs now.

The maximum we can put in an ISA is in an ISA but it's not a flexible ISA.

Do mortgages without overpayment fees exist? and if so what's the catch?

If my calculations are correct then my idea will have little benefit if any.

EssexHebridean

Many mortgages allow some form of overpayment without penalty. Our original one (Northern Rock, then Virgin Money) allowed up to 10% of the capital amount outstanding at the 31/12 in the previous year to be OP'd without penalty. Our current one (First Direct) allows unlimited OP's. Most of those we looked at allowed some variation around the 10% theme, which was one of the reasons we went with FD! 

pieroabcd

redundantmortgage said:

How much we'd need would depend on how much the mortgage would be as this would be the biggest chunk of our outgoings. Also aware council tax, energy bills etc. would cost more in a bigger property. I suspect we'd need more that £20k each given how much everything costs now.

The maximum we can put in an ISA is in an ISA but it's not a flexible ISA.

Do mortgages without overpayment fees exist? and if so what's the catch?

If my calculations are correct then my idea will have little benefit if any.

Many tracker mortgages allow unlimited overpayments without early repayment charges, for example my tracker with Barclays.

I'm regularly overpaying all the salary and I've always dismissed ISAs and saving accounts because my freedom from the mortgage is invaluable.
I'll have time for savings accounts when the mortgage is closed (hopefully) and in the meantime I won't end up with a house paid more than its market value (because of the interests).

The problem with tracker mortgages is that they are variable rate, Boer plus the bank's fixed interest.

Herzlos

redundantmortgage said:

Do mortgages without overpayment fees exist? and if so what's the catch?

Standard Variable Rate mortgages don't have repayment fees either. It's really only the fixed term 'deals'.

The catch is that you usually pay a higher interest rate and it can vary, but the benefit is that you can overpay as much as you want.

redundantmortgage

Sounds like as a general rule the more flexibility you have the more interest you pay. 

The mortgage we did have seemed a generous overpayment allowance and sounded like the level we'd never exceed when first taking it out. By the end we could easily exceed it.

I share the same sentiment about mortgage freedom and not paying any more interest than we have to. We paid £10k interest on a property that cost over a quarter of a million. The day we paid it off gave mixed feelings. Obviously great to know the property was now 100% owned by us and couldn't be taken away. At the same time our savings had exceeded our remaining balance for around a year and we were well aware it wasn't our forever home and we'd have to take out a mortgage again.

Prior to that moment I'd paid some sort of monthly cost to keep a roof over my head my entire adult life, but now the thought of doing that again is quite intimidating.