Repay mortgage or not?

greco_2

My wife and I borrowed £200,000 against our property to enable my elderly mother in law to buy a small house for her retirement. At the same time, we took a charge against her existing property which will be repaid when the sale is completed next week. This means that we will have £200,000 in cash which we could use to repay the mortgage. The mortgage is a Woolwich lifetime tracker costing 0.39% over base which is cheap money in the current market.

My wife and I are looking at buying a plot of land in Greece with the intention of building a new house and moving there permanently. The total cost will be around £250,000 with an initial cost of £65,000 for the land which we will have to pay in a couple of months time. It will then take about 18 months to build the house from obtaining architects drawings to final completion. We will need to put down about £60,000 as a first stage payment about the end of this year with further payments as the work progresses.

We can find the money to buy the land from our own resources but what I’m trying to get my head round is whether we should pay off the existing mortgage and set up another one when building work starts or put the £200,000 on deposit and draw off it as we need it. The only cost of paying off the mortgage is a £275 exit fee.

Obviously any interest earned would be taxable unless I put it into an offshore account where the interest is rolled up. That might work quite well as I anticipate being a non-taxpayer in a couple of years or so. We are both higher rate taxpayers at present.

Would the wise people of MSE forums care to comment?

dimbo61

have you checked out the mortgage rate / loan rate in greece ?
If you are going to pay a higher rate and fees to borrow the money even in stages you may well be better off paying some 2x £3600 into ISA,s and the rest spread over several banks £35,000 max in any one account !
some banks are paying 7% before tax at 20% at the moment for money deposited for six months/one year.
check this out with a good accountant and GOOD LUCK in your home in greece.

greco_2

Thenks for your good wishes. Good luck is something you need a lot of when trying to buy property in Greece!

I've looked at Greek mortgage rates and they are cheaper and I'm also aware of the currency risk although my opinion is that the £ will recover some ground. Greek mortgages appear to be of the conventional variety and I haven't found one yet that will enable me to draw down as the work progresses or will let me pay it off before the end of the term. Perhaps I need to look a bit harder.