Remortgaging - what to do with savings

GemmaC

Hi,

We currently have a mortgage of £220k taken over 30 years (the house is worth roughly £265/270k) and our fixed 2-year deal ends at the beginning of Sept, which was at a rate of 5.44%. I think we want to stay fixed but probably for 3 or 4 years and the best rate our current lender has come up with is 6.84% for a 3-year deal or 6.39% for a 5-year fixed deal.

Our current payments are £1275 a month and this takes them up to a minimum of £1411 a month (including the £699 arrangement fee), so obviously I want to have a look around and see what other deals are around. We have combined earnings of £71,000 so hopefully it wouldn't be too difficult to borrow elsewhere. We would probably continue with our 28-year term.

I have read a little on here about putting savings into your mortgage to reduce the amount versus putting your savings in an ISA and earning interest that way. We have about £10 - £15k savings in ISAs at the moment (at a rate of about 6%); how would I be best to work out whether we're better off removing some of this money and putting it into our mortgage to reduce the amount we owe? I understand a certain amount about mortgages but what to do with our savings is confusing me.

Or perhaps it would be better for us to over-pay each month? Providing the monthly amount doesn't go up too much (i.e. hundreds) we could easily over-pay each month by 10% - especially if we were able to stop this should we need the money. Really we should have been doing this all along but then I suppose we wouldn't have built up our ISAs - but which would have been more profitable?

Thank you for your help in advance.

Gemma

dgibby

If you don't get put off by the £1499 fees - the First Direct 5.49% 2yr fixed Offset mortgage sounds good for your needs. You can take the £220k mortgage out but then (not too much of a hassle) move some money to the first direct bank and savings account. You then have the flexibility of it all and you can reduce the mortgage repayments as you are offsetting it against your savings. Hope this helps.

Rafter

Gemma,

I'd recommend an offset deal for you as well. First Direct fee works out at 0.34% each year on top of the interest rate for a loan your size, so not too bad.

Act quick though - money market rates shot up again yesterday so deals might get repriced quickly. As september is only 3 months away you could apply now to secure the rate. You might lose a booking fee though if rates are better in a couple of months time and you decide to change provider again though.

R.

dimbo61

hi gemmaC think long term are you going to be able to clear the mortgage in the next few years NO! then look at longer term 5 year deals.
you were right to save money into ISA,s over the last 2 years as hopefully you have been getting a better rate of return from your ISA,s than you were
paying on your mortgage and it is always wise to have an emergency fund
in case you need money.
shop round for the best deals and consider offset mortgages as they are
very flexible . overpay if you can but keep your emergency fund GOOD LUCK