Pay off mortgage or save for deposit??

Fluke?

Fluke?

Fluke?

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Joined
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South Glos
Hi all,
in a bit of a quandary with what to do re our mortgage.
Here are the financial details:

-Paid £107.5k for the flat in Oct 2007 with a £99k mortgage (so £8k ish deposit)
-Now worth ~£99k (going by recent sales in my block)
-Mortgage rate is ~6% 5yr fixed rate due to end in Oct 2012
-Mortgage is now down to around £96k
-Paying around £600 per month.

OK, we are trying to work out if there is any way of moving up the property chain and how best to go about this. We are starting to look at properties around £130-£150k. Repayment wise I would imagine at current rates the monthly amount due wouldn't be that much higher than we're paying now.
What I understand is that as it stands, if we were to sell for £99k we would be 4 grand in the green and that would be used toward the deposit. So if we were looking at a property for £130k we would still need to find and other £9k to make a 10% deposit.

Anyway... what I would really like to know is what chance we have of the banks actually giving us a higher mortgage under these circumstances?
Currently we don't have a vast deposit saved, so would we be better trying to build up the 3% ISAs we both have and use that as the deposit, or would we be better trying to pay and additional £100-£150 a month off on the mortgage? Part of me is thinking the latter because of the interest but I cannot quite get my head around how it would make a difference.. :confused:

So guys, with all that in mind what would you do? Or should we just give up the idea of moving any time soon and hold tight for October and see what the bank says?

Cheers :)
 
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Fluke? said:
Hi all,
in a bit of a quandary with what to do re our mortgage.
Here are the financial details:


pay and additional £100-£150 a month off on the mortgage? Part of me is thinking the latter because of the interest but I cannot quite get my head around how it would make a difference.. :confused:

So guys, with all that in mind what would you do? Or should we just give up the idea of moving any time soon and hold tight for October and see what the bank says?

Cheers :)
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unless you can get higher return than the mortgage rate, pay off the mortgage you will save on interest and the deposit will be the equity in the flat anyway.

bare in mind the costs of moving will be horendous though.
 
Bennie-Mac said:
Deposit in my opinion. No interest to pay over 20 years or whatever. If you pay off some of your mortgage, you will only need to add more to it to afford the house. If you save up a deposit then you will add less to the overall mortgage amount.

Hope that makes sense.
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basic maths, pay the bank 6% but get 3% interest net loss 3%

pay off the mortgage net loss 0%
 
Why save for a deposit when putting equity in the house would have the same effect on your LTV on the next place ?

Unless you can guarantee beating 6% savings
 
Thanks for the quick replies chaps. Unfortunately we only have a few grand we could call a deposit, and tbh hadn't even thought of moving costs - solicitors etc etc. :(
I'll have a chat with Nationwide and see how much we can overpay before being penalized but should imagine £150 wouldn't...
 
work on £8000 for selling and buying a property, before you even worry about LTVs and new properties.
 
Is there any penalty for altering your mortgage early?
Stuck with 6% at the moment is absolutely bloody awful!
Espeically when there is next to no chance that rates will move at all for the 18 months of your remaining tenure.
Try to shift mortgage on your current place.
Make savings that way.
 
Hikari Kisugi said:
Is there any penalty for altering your mortgage early?
Stuck with 6% at the moment is absolutely bloody awful!
Espeically when there is next to no chance that rates will move at all for the 18 months of your remaining tenure.
Try to shift mortgage on your current place.
Make savings that way.
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Nearly always a penalty for a fixed deal be that a discount or a tracker or a fixed.
Its normally a penalty based on so many months interest AT THEIR STANDARD RATE. If your paying extra you will pay penalty on the amount of the overpayment, if your getting out of a deal you will likely pay the penalty on the whole amount owed.
Eg I had a 15 year fixed mortgage, first five years held a 1 years interest penalty, years 6-10 held a 6 months interest penalty, years 11-15 held a three months interest penalty.
 
billysielu said:
how do you buy a flat for 107.5k, sell it for 99k, and end up 4k in the green?
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in the green as far as lender concerned in terms of negative equity.
They lent us £99k and have paid off 4k so going by their logic we are in the green, otherwise if say we still owed 105k and sold it for 100k we'd be 5 grand in the red and have to pay that off before theyd even think of lending us more. Afaik anyway :p

edit... actually paid nearly 30k but seemingly 26 of that in interest!!
 
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The general idea is, you pay more interest on your mortgage than you'd get on savings. In theory therefore, reducing the mortgage, or saving should produce the same end result (+/-). Personally, I would drop the mortgage if possible
 
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