Mortgage Advice - Lump Sum

mortgage_advice · 7 August at 4:28PM

My mortgage is due to renew in a few months and looking for advice.

We were on a low interest rate previously and 4 years ago took out a re-mortgage with £40k extra for renovation works to the property (wish now I’d never done that, mortgage broker suggested it to us), so that brought our outstanding balance / length of term up.

Interest rates went crazy high and I’m currently paying 5.99% (£960 per month) with 26 years remaining. Outstanding balance is now £150k. The property was last valued in 2021 at £200k (before we renovated - have since added on two bedrooms and bathroom to a loft conversion).

I could ask for a re-valuation to be done, but I hear lots of houses have gone down in value and I’m worried ours would too? Surely not, but I have no clue.

I’m ashamed to admit that I didn’t realise until recently about paying in extra each month or a lump sum to come off the capital and reduce the length of the term. I feel that my outstanding mortgage balance had slowly been coming down, but now it feels like I’m just paying interest the last 2 years (it’s not an interest only mortgage, it’s one where you pay back towards owning the house too).

We are in a position to put down a sum of up to £20k towards the mortgage (I think the current provider would allow 10% max). I would feel better having it in some sort of access savings account (as you never know what could happen) but my husband disagrees and said towards the mortgage would be better long term.

I don’t know what the new rates are going to be yet, Mortgage broker is working this out.

But what do you all recommend? Should I put this big sum down, or do small monthly top up payments and ask for that to come off the capital?

Or is there somewhere else I could put that £20k into and get a decent amount of interest? It’s been sat in a normal bank account for a years with low interest rate (again wish I’d looked into this sooner).

We normally do a 2 year fix deal, but is it better to fix for a longer term?

Is there somewhere we can go to for free financial advice. I wish they taught you things like this at school and if I could go back 10 years ago I’d have done top up payments monthly and sorted proper savings accounts.

Thank you for your help.

Brie · 7 August at 4:39PM

Given that interest rates are reducing I doubt you'll get more on your savings than you'll be paying out on the mortgage. My gut would say to put the lump on the mortgage and then overpay into a savings account. That way you build your emergency fund back up while paying a bit less on the mortgage than otherwise.