mattvortex

I have a flexible offset mortgage that for about the last 3 years, ive only been paying 1.00% interest (base plus 0.5). Ive been sent a couple letters in that time, suggesting that i can either:

Overpay by £100 for next 5 years, so reduce my mortgage term by 1yr 2mths and save £3070 in interest.

or

Keep £5000 in savings pot and reduce mortgage by 1year 1 mth and save £3199 in interest.

or

Make a one-off payment of £10,000 to reduce mortgage balance. This wont reduce term but will save £2780 in interest and of course my monthly payments would be slightly less each month.

Ive more or less dismissed the one off payment as i would earn more interest just leaving it in a 3.00% isa for the 20 years remaining.

My mortgage wasoriginally for £93700 ( property was £110,000) and i have approx £81,000 left to pay.
I would ideally like to sell this year or next and buy a property in the £135,000-£140,000 range. If i could sell mine (be a struggle-its a flat), its probably now in the £95,000-£100,000 range. Thats ok as any property id like to buy has also dropped accoridngly.

Should i still do the savings pot thing with my existing mortagage or would i be better off just saving it to put down on my next purchase?

Also, do you think it might be a good idea to let my flat and try selling as a buy-to-let for someone, with tenent already in place? Ive let it in the past for short term (working away) and it let real quick. Ive seen estate agents in town do this as investment buys with the tenent already there. Maybe it might sell abit quicker this way??

Thought id post just to get an idea of what you guys think, as iam not that clued-up with mortgage/finance matters!

Cheers.

Matt.

Boro

iTrader: (1)

Would the rent, pay the mortgage on it?

mattvortex

Yes,at the moment it would.

Edit to say thats only because of the very low interest iam paying. Probably , the rent wouldnt pay the mortgage if i put it on buy-to-let and i bought somewhere else as well, hence i think it would have to go.

Boro

iTrader: (1)

Could you not keep it, rent it out and buy another property to live in?

mattvortex

Probably not, as i think if you put a place on buy-to-let mortgage, you normally have to have 40% plus equity in it- i havent! Also, with the higher interest you pay on buy-to-let, the rent probably wouldnt cover mortgage.
It might be worth me going and talking to someone about this, though.

jh1-2009

Although house prices have dropped, renting has even more demand. Even if you rent and it dosn,t quite cover the mortgage you still have in effect somene else buying the house for you. It,s just wether you could afford to get your new place without selling up.

LSherratt

iTrader: (1)

I think you'll struggle to sell your flat simply because it's a flat and people would rather rent (high demand) unless you accept an offer quite a bit under your asking price or just hang on until you're happy with an offer, sell up, and then go ahead and buy another property.

Or you could hang on for a few more years to save a big enough deposit for another property, and rent out your flat (only if it's enough to cover the mortgage).

You're best bet is to book into a financial advisor and get professional advice.

ScoobyWon't

Do you have the extra cash to be able to overpay?

Do you have £5000 which you could put in the savings?

Does your mortgage provider have a savings account which pays the same amount of interest as your ISA which you could then link to your off-set mortgage?

mattvortex

Yes, i do have extra cash to overpay but i think as iam only paying 1.00% interest on the mortgage at the moment, id be better off keeping it in an isa paying 3.00%.
Iam not sure about your last question-id have to check.

I think iam swaying towards renting my flat out and seeing if i can get a higher mortgage to buy somewhere else to live in. It might be tougher finding a willing provider now as i understand the lending criteria is much stricter than when i applied for my original mortgage in 2006-7.

Thanks for the replies so far, folks

EddScott

I think I've seen a BTL offer at 80% LTV with a 1% arrangement fee.

Don't know if you could port the mortgage to the new property and have a new BTL mortgage on the flat?

I think more care is taken over things like abilty to pay the monthly payments. You already have an 80K mortgage so that would be taken into account when deciding if the lender should give you another mortgage. Will your salary stand up to both payments in the event you have to pay both mortgages if the flat is empty.

Also interest only has become a bit of an issue with some lenders - they no longer will accept "I promise to pay the capital off, cross fingers etc etc" They want good proof that you have something in place - some are harder than others.

You'd be better off asking a mortgage specialist really - a specialist, not the bank adviser BTW.