Saving for the next house save or pay off mortgage
Discussion
Quickly one for you finance gods out there as I'm out of touch with house buying.
My son currently has his own house which he bought new with a deposit and mortgage. He wants to save for his next house, a step up for the inevitable family.
He's asking me is he better putting his disposable income into a savings account and save a cash sum, or pay off more each month on his existing mortgage meaning he owes less when the day comes.
My guess is he's better paying down his mortgage, but am I missing something?
Thanks in advance.
My son currently has his own house which he bought new with a deposit and mortgage. He wants to save for his next house, a step up for the inevitable family.
He's asking me is he better putting his disposable income into a savings account and save a cash sum, or pay off more each month on his existing mortgage meaning he owes less when the day comes.
My guess is he's better paying down his mortgage, but am I missing something?
Thanks in advance.
The inevitable fees. Stamp Duty, solicitors, moving and things like that eat actual cash. So the answer is actual cash until he has enough to cover those, and the usual x months costs, then pay the mortgage down. Or perhaps both at once, thus reducing the interest payments on the mortgage while stashing cash as well, but less.
randlemarcus said:
The inevitable fees. Stamp Duty, solicitors, moving and things like that eat actual cash. So the answer is actual cash until he has enough to cover those, and the usual x months costs, then pay the mortgage down. Or perhaps both at once, thus reducing the interest payments on the mortgage while stashing cash as well, but less.
Thanks for that, makes sense 
randlemarcus said:
The inevitable fees. Stamp Duty, solicitors, moving and things like that eat actual cash. So the answer is actual cash until he has enough to cover those, and the usual x months costs, then pay the mortgage down. Or perhaps both at once, thus reducing the interest payments on the mortgage while stashing cash as well, but less.
You do need some small amount of cash for solicitors fees that come up front (searches and what have you) plus removal costs, but stamp duty, estate agents fees, the main bill for the solicitor, etc. were all paid out of the equity in my current place once completion had happened.I'd be paying down the mortgage as a result. Mortgage rates are low at the moment, but they're likely still higher than a savings account.
steveatesh said:
randlemarcus said:
The inevitable fees. Stamp Duty, solicitors, moving and things like that eat actual cash. So the answer is actual cash until he has enough to cover those, and the usual x months costs, then pay the mortgage down. Or perhaps both at once, thus reducing the interest payments on the mortgage while stashing cash as well, but less.
Thanks for that, makes sense Most importantly, the return available on a savings account is likely to be lower, after tax, than the mortgage rate.
I'm assuming he is already attached / married with partner? Just saying from previous experience, it might be better to buy the future family house as a joint asset (or maybe just a reflection on my poor choice of ladies - though this being PH i'm sure someone will explain that all women are sn**** ...).
Pay down the mortgage is normally the best option.
You need a couple of grand actual cash to move to pay removals, searches etc. But as said above, the big ticket things like stamp duty come off the balance on completion.
I moved like this in the middle of last year. Used very little actual cash.
You need a couple of grand actual cash to move to pay removals, searches etc. But as said above, the big ticket things like stamp duty come off the balance on completion.
I moved like this in the middle of last year. Used very little actual cash.
Jockman said:
In that situation 3 years ago I paid down the mortgage substantially. I then used the increased equity at sale time to get the optimum 60% ltv deal.
If I had kept it in cash I just would have bought another car
I'll modify that..... I pay down the mortgage ... if I keep it in cash the wife just buys shoes/clothes/jewellery before I get a chance to buy a car.If I had kept it in cash I just would have bought another car
she buys a lot of shoes/clothes/jewellery
steveatesh said:
Quickly one for you finance gods out there as I'm out of touch with house buying.
My son currently has his own house which he bought new with a deposit and mortgage. He wants to save for his next house, a step up for the inevitable family.
He's asking me is he better putting his disposable income into a savings account and save a cash sum, or pay off more each month on his existing mortgage meaning he owes less when the day comes.
My guess is he's better paying down his mortgage, but am I missing something?
Thanks in advance.
What is his current rate, is it likely to end and what is the prevailing view of future rates? Is it a Help to Buy, and if so, when did he buy? If it is a Help to Buy, his annual interest fee will increase by a minimum of 1% from the fifth anniversary of his loan. My son currently has his own house which he bought new with a deposit and mortgage. He wants to save for his next house, a step up for the inevitable family.
He's asking me is he better putting his disposable income into a savings account and save a cash sum, or pay off more each month on his existing mortgage meaning he owes less when the day comes.
My guess is he's better paying down his mortgage, but am I missing something?
Thanks in advance.
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