Is this how a Remortgage works?
- Thread starter Skeeter
- Start date
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Where? We currently have 3x Santander 123 Current Accounts getting 2.4% after tax.
For the long term benefits overpaying brings. Throwing our planned over payment amounts into an online calculator renders a reduction of 13 years and in the term and saving of £70k+ in interest.
I had forgotten about those tax changes, thanks.
There's also the security of money being tied up in property. Being 'locked away' can be a good thing. Its not sitting around in an easy access account where it can be spent on man toys, and (not that I have any fear it might happen) its safe from either me or my partner stealing it all if we split.
There's also the security of money being tied up in property. Being 'locked away' can be a good thing. Its not sitting around in an easy access account where it can be spent on man toys, and (not that I have any fear it might happen) its safe from either me or my partner stealing it all if we split.
I understand the thought process but you know for certain that you want to release some of that capital for home improvements in a couple of years. If in two years your property has not increased in value as much as you hoped, or you had to pay for a re-valuation, you might be shooting yourself in the foot if you can get a higher rate on savings than the cost of the mortgage. It also makes it easier to react to unexpected bills / reductions in income that may crop up. When it comes to security, IMO having money in instant access deposits is much more secure than having a smaller debt to a creditor.
We deliberately paid our mortgage for years longer than necessary because it was the most financially sound choice, as savings paid better rates than the interest on the mortgage. Reducing the term by paying more than necessary would have been foolish IMO (not calling you a fool btw!) - just as it would have been for my student loan.
We deliberately paid our mortgage for years longer than necessary because it was the most financially sound choice, as savings paid better rates than the interest on the mortgage. Reducing the term by paying more than necessary would have been foolish IMO (not calling you a fool btw!) - just as it would have been for my student loan.
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Soldato
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Yeah I'd say this is a good idea.
I would not overpay the mortgage to take it out later, it will be a headache to do it, especially when you'd need the money in less than 2 years.
We are spending all of our savings and more on the house, so haven't got anything to offset against. We would like to look at using one in the future.
I like the idea of overpaying to reduce the term. The thought of being 50 something and mortgage free sounds nice, whereas currently with our current term I will be well into 60 something before that happens.
I think we will go half way. Overpay into the mortgage but only around half of our savings each month. Put the other half in a savings account to pay for the Kitchen and other things, and leave the mortgage overpayments in the mortgage. We would hopefully then be able to overpay forever, or at least for the considerably future.
I like the idea of overpaying to reduce the term. The thought of being 50 something and mortgage free sounds nice, whereas currently with our current term I will be well into 60 something before that happens.
I think we will go half way. Overpay into the mortgage but only around half of our savings each month. Put the other half in a savings account to pay for the Kitchen and other things, and leave the mortgage overpayments in the mortgage. We would hopefully then be able to overpay forever, or at least for the considerably future.
You can offset with income and regular savings, not just a lump sum sitting there. The long term effects of even small overpayments (which is effectively what an offset does but better in some instances) are quite significant. It may be something for you to sit down ant talk through with a decent broker in the shorter term.
One sensible response on this thread was from Mercenary Keyboard Warrior... saving for the kitchen the way you originally planned is fine but you are making many assumptions, house prices could fall and as MKW pointed out quite rightly.. there is no guarantee that at some point in the future you will actually be able to liquidate the equity in your property. The regulatory burden on mortgages both domestic and from the EU is moving all sorts of goal posts, so, better to save specifically for the kitchen away from the mortgage.
Overpayments on the mortgage though, no matter how small, are a great idea, as long as you can afford it and it doesn't prevent you from having a rainy day fund, something you should always consider having.