overpaying

dobydog

I have a £80,000 mortgage, and have had a small windfall, at the moment I am on a special rate until November.

Is it worth me overpaying which I am allowed to do upto 2.5% without plenalty or would I be better waiting until I try to remortgage in Novemember.

Any advice would be welcome

mr_mortgage

In November you may find that a fee-assisted mortgage product will give you the best value and it could be handy to have a few quid around to pay the fees. If you overpay now, then remortgage you might find yourself having to come up with a few hundred (or more) quid which can be a right stinger.

Dick_here

Repay before re-mortgaging. You may get a better deal by having a lower LTV ratio.

mr_mortgage

!!!!!!_here wrote: »

Repay before re-mortgaging. You may get a better deal by having a lower LTV ratio.

The OP would still have the lower LTV, regardless, since they would have the cash in their hand to reduce the amount they would need to borrow when remortgaging.

It's quite simple, if repaying 80k and you have 5k in your hand borrow 75 from the new lender and give your solicitor the 5k so they can redeem your old mortgage in full.

There is absolutely no need to repay in order to lower a future LTV.

Dick_here

mr_mortgage wrote: »

It's quite simple, if repaying 80k and you have 5k in your hand borrow 75 from the new lender and give your solicitor the 5k so they can redeem your old mortgage in full.

There is absolutely no need to repay in order to lower a future LTV.

Not true.

If you're re-mortgaging and getting a new fixed rate, the deal on offer will be dependent upon how much you owe at that time, not a bit later as you may have repaid a bit more by then.

mr_mortgage

Huh? It'll be based on how much you want to borrow (at least it is in the large bank HQ that I am currently sitting in)

... it is commonplace that people wish to remortgage when receiving a lump-sum (inheritance, usually) and borrow less than is outstanding on the mortgage. There are well-oiled processes in place to deal with this.

ThriftyBeanie

In order to properly answer your question we would need to know:
1. Your current mortgage rate
2. What ISA allowance have you used in the current year, and if any part is cash ISA, how much have you put into the cash ISA and at what rate
3. If you have used up your ISA allowance, are you a top rate taxpayer, basic rate taxpayer, or non-taxpayer

If you can answer these questions, we could point you in the direction that will earn/save you a few extra quid. But to be honest, as the maximum penalty free overpayment is £2k for a 5-6 month period, the differential is not going to be great. If you pay the £2k allowed into your mortgage at least that takes it out of temptation's way to spend!

_Andy_

Agreed with Mr M. The mortgage company will base the LTV on the risk they're taking on - i.e. the amount they actually are going to lend.