Next house - financial

[Moley RUFC]

Im pretty sure this thread should live here and in housing.

We have a house valued at £285k (3 years ago). It's in a nice area, near a school, cul de sac etc. It is our first house purchased 7 years ago for £228k (£210k mortage). We wanted our first house to be our 2nd or 3rd house if you know what I mean, large enough to start a family without the worry of moving. We now have 2 fantastic kids and live within our means without credit cards and also overpaying our mortgage by £200 a month. We both have combined savings of about £30k which goes up about £2k a year.

Since buying it we have managed to bring our mortgage down to £160k and by the time we plan to move in about 4 years time it will be down to £100k. .

Now the question. IF all things stay as planned on the above and I appreciate there are so many things that could change but in an ideal world they stay then when we sell we should have about £185k (if we get what was valued a few years back on the house) to invest in property of about £350k(hypothetical) leaving a £165k mortgage.

Do we:

1) Pay interest only on this knowing the house property will always be worth more than is owed and then pay off £5-£10k a year built up on savings. We can then enjoy life a bit and someone can get his dream Elise 111R before I'm too old to enjoy it properly (currently 32).

2) Do we start a mortgage again but over a period of 25 years meaning lower payments and the possibility of paying off the mortgage if we receive money in time from parents, parents houses etc.

3) Take on a shorter mortgage with higher payments but just try to pay it off in 10/15 years.

What are the opinions? I appreciate mortgage rates, house prices, jobs etc will change but this is a hypothetical question based on current situation. I appreciate the above options could all be correct in certain situations too.

We are also conscious of paying for things for the kids in time too of course!

[anonymous-user]

Personally I would avoid interest only, but that's based more on my nature than on any actual science.

Personally I would take out a longer mortgage but one that gives you the option to overpay, or to pay off early without too much of a penalty. This gives you flexibility, whereas if you take out a shorter mortgage with higher monthly payments you could find yourself under a lot more pressure if for example you lose your job or have some other financial strife in the future.

[RV8]

Well not to blow my trumpet or anything....ffs


How's about chucking a mediocre percentage of those savings towards an IFA and get some detailed advice with regards to all elements of your financial situation and outgoings.
Or were you just looking to boast a bit about your situation on a car forum?

[essayer]

Moley RUFC said:

We have a house valued at £285k (3 years ago).

3 years ago prices were very different .. have you looked at values now?

The house we are buying was on the market 3 years ago for £60k more than we are paying for it now (£290k)

[Moley RUFC]

RV8 said:

Well not to blow my trumpet or anything....ffs


How's about chucking a mediocre percentage of those savings towards an IFA and get some detailed advice with regards to all elements of your financial situation and outgoings.
Or were you just looking to boast a bit about your situation on a car forum?

Great, thanks. Jog on....

[RV8]

You're welcome. Getting an IFA is the best advice you've had yet so suck on it.

[Moley RUFC]

RV8 said:

You're welcome. Getting an IFA is the best advice you've had yet so suck on it.

[Moley RUFC]

Seems sensible that

[iphonedyou]

RV8 said:

Well not to blow my trumpet or anything....ffs


How's about chucking a mediocre percentage of those savings towards an IFA and get some detailed advice with regards to all elements of your financial situation and outgoings.
Or were you just looking to boast a bit about your situation on a car forum?

If you think that's boasting, you've no idea what you're talking about.

HTH and suck on that,to borrow your vernacular.

[scotal]

RV8 said:

You're welcome. Getting an IFA is the best advice you've had yet so suck on it.

Not necessarily, it would depend very much on the IFA.
Plenty of IFA's would look at that and see sales opportunities right left and centre.
(How about not overpaying but putting it in a pension? How about we lock some or all of your savings into a bond or investment? How about you move now, and extend the mortgage?)

Personally OP, I'd keep doing what you are going on the current house, then reassess youur financial situation in 4 years when you come to move.

A couple of guide points, Interest only is becoming less and less popular with lenders. Most will now insist on a defined repayment vehicle, this will get worse as the FSA gets its teeth into the mortgage market over the next couple of years. Their big thing at the moment is "responsible lending" and they see I/o as irresponsible.

Overpaying now is a good idea, particularly as you have a healthy chunk of cash in the bank to cushion you against rainy days.

When you come to move if you can stick with your existing ideal of borrowing and then overpaying, the term of the new mortgages is irrelevant.

BTW you sound like the ideal candidate for offset. Consider it now unless you are on a stonking rate that'll you'll lose if you remortgage.

Davil's Advocate:- If you have £30k in savings, why not buy the Lotus now? You can always sell it if needs be?(I'm assuming you're not spending £30k plus on the car)

[Moley RUFC]

Some good points there. Regards the Lotus now, well I've no garage or anywhere to keep it really with 2 cars on an already tight drive. (Converted my garage into an office a few years back, D'oh!!!). The plan was to move in a few years to a slightly larger property with a proper sized garage for the Lotus to live.

Regards offsetting what exactly is this?

[The Ferret]

In a similar position myself numbers wise, and we decided to reduce the term of the mortgage last year from 20 years to 12. Clearly the monthly repayment went up considerably, but with the lower rate we managed to get it was largely offset (came from something like 6% to 2.99%)

Made a massive difference to the overall amount to repay, which realistically is what we are all trying to lower to nil.

I guess it had the same effect as overpaying, only that it committed us to doing it rather than giving us the option to not bother some months. The only thing we needed to make sure was that we could keep up the repayments if we lost our jobs, and with the term only being 2 years we were comfortable with it.

Next renewal we hope to reduce the term by another year or so, and so on. I appreciate rates may not be as low when we renew, and we may need to actually increase the term, but the way I looked at it was to get as much paid of as we could while rates are low - so that when they increase it will be easier to swallow.

[scotal]

Moley RUFC said:

Some good points there. Regards the Lotus now, well I've no garage or anywhere to keep it really with 2 cars on an already tight drive. (Converted my garage into an office a few years back, D'oh!!!). The plan was to move in a few years to a slightly larger property with a proper sized garage for the Lotus to live.

Fair do's. Dont do what I did, and spend the cash on other things.

Moley RUFC said:

Regards offsetting what exactly is this?

Your savings (which may be earning you not a lot st the moment) are put into a savings account linked to your mortgage.
Rather than earning interest on the savings, they are used to lower the interest payable on the mortgage.

Your current mortgage is £160k
Your savings are £30k
If you had an offset scheme you would therefore be paying interest on £130k.

You can elect to either lower the payments on the mortgage so they would be the same as you'd be paying if you had a £130k mortgage, or pay the mortgage as if you had a £160k deal which would then mean you are automaticvally overpaying each month.

By putting cash in the offset account it is an effective overpayment, but you keep access to the funds should you need them.

Whether it works for you depends on your level of savings, your financial discipline and whether you're tied into a mortgage at the moment.

[Moley RUFC]

That's sounds good Scotal. Presume you can get the savings back if you need them at some point but you are just using them to show the borrower you have the funds available if needs be.

We are however on a 2.5% tracker with Nationwide (+ 2% on BR) so I'm not sure if they would accept this type of change. I will find out though. Thank you

edit: Looking around I wonder if we're on the best mortgage rate anyway. There seem to be a few at 1.99% that are tracking the base rate at + 1.5% not the +2% we are on

Edited by Moley RUFC on Monday 13th February 11:49

[RV8]

swerni said:

RV8 said:

Well not to blow my trumpet or anything....ffs


How's about chucking a mediocre percentage of those savings towards an IFA and get some detailed advice with regards to all elements of your financial situation and outgoings.
Or were you just looking to boast a bit about your situation on a car forum?

What a bell end!
If you think he's boasting with those figures, if you are an IFA you clearly aint a very sucessful one.


OP Don't assume the value of the house will be worth more than you pay for it.
If you view it as your home rather than an investment then I would pay off as much as possible why interest rates are low.

Put your handbag away you fking tart.

[RV8]

scotal said:

Not necessarily, it would depend very much on the IFA.

So find a good one. No one said you have to accept their advice - I'd rather that than a bunch of faceless individuals on a bloody forum not even related to the financial industry. You know nothing about his plans for the future or his outgoings / job security - other than what is on here. For example he might want to send his kids to public school at some point or save for their education - just one element to consider.

I just take it as this. He's basically doing fine, and he knows it. So he's either after a bit of an ego boost or he's as daft as a brush because non of the info on here is anything that anyone with a modicum of financial knowledge wouldn't be able to figure out for themselves after 10 minutes on the net, he's even answering his own points - unless his wife is the financially savvy one and a constructive way of him getting advice regarding their financial situation really is off a car forum, I know there are IFAs on here and perhaps they are doing so well they like working for free.....

One poster is right, he's not doing as well as some, but that doesn't stop folk from banding it about.

[scotal]

RV8 said:

scotal said:

Not necessarily, it would depend very much on the IFA.

So find a good one.

Tell me oh wise sage, how does he go about that? I guess he could ask on PH?

[scotal]

Moley RUFC said:

That's sounds good Scotal. Presume you can get the savings back if you need them at some point but you are just using them to show the borrower you have the funds available if needs be.

Yes, but differing offset schemes have different criteria, some are effectively like an enoufmous overdraft, and if you want to get the funds back you simply write a cheque.
Others are slower, but that does mean you won't access your saving spontaeneously.

Moley RUFC said:

We are however on a 2.5% tracker with Nationwide (+ 2% on BR) so I'm not sure if they would accept this type of change. I will find out though. Thank you

Nationwide won't simply allow you to offset on their SVR. You would have to change to a new mortgage if you want an offset.

Moley RUFC said:

edit: Looking around I wonder if we're on the best mortgage rate anyway. There seem to be a few at 1.99% that are tracking the base rate at + 1.5% not the +2% we are on

Tkae the fees into account if you start looking at new mortgage, make sure it pays you to remortgage.

[Moley RUFC]

Thanks for your help Scotal. Food for thought...

[CaptainSensib1e]

Moley RUFC said:

We have a house valued at £285k (3 years ago).

In all seriousness, what's it worth now? Prices have fallen quite a bit in certain parts of the country over the last 3 years. Even if the value hasn't changed you're dangerously close to the magic £250k stamp duty barrier which could make shifting your property tricky.