Another mortgage one

[bagforlifeamnesty]

Already crapping myself about our current fixed term deal (1.7%!!) ending in two years, Aug 2025. House is worth around £500k (expensive area of south east) but we still have an eye watering £290k on the mortgage. By the time the fix ends we’ll still have 27 years left to pay. Gulp.

At current rates our payment would jump from £1060 per month to around £1600 a month. This would be annoying but doable. However I’m getting worried about 8/9%+ and then the payments could be upwards of £2k. Meanwhile I’m pregnant with DC3 and staring down the barrel of another set of nursery fees.

We are fortunate that we still have this low rate for the next 2 years and in that time can afford to save approx £400 per month. I was initially planning on putting it in a high interest savings account and then building up a lump sum to overpay the mortgage at the end of the fix (it’s better than doing it as I go along as we’re only saving the 1.7% interest by overpaying but can get 6-7% interest in savings so can pocket the difference). However over two years this is only £10k which is not really going to touch the sides. I’ve calculated that reducing the mortgage by 10k will only knock a small amount off the monthly repayments, around £30-40. Now I’m wondering if I’d be better not using the £10k to overpay and instead keeping it as a cushion to dip into if the rate we end up on is ridiculous and we can’t afford it out of our monthly budget. WWYD?

I suppose either way you don’t have to decide yet but I think you’re right to start saving as much as possible.

Sorry meant to ask, do you have any other savings already?

Yes we do have some savings, about £10k which is put by as an emergency fund. We have no plans to spend it currently.

I’d use it as a cushion like you say if it’s not going to make much difference. Though tbh you’re in a better position than many people by the sound of it. You could always try to downsize or move to a cheaper area to offset it a bit

Also Martin Lewis is on tonight at 8pm to discuss mortgages, might be worth a watch for you as he might answer your question in one of his scenarios!

Oooh thanks @Daisywishes i will tune in!

Another option would of course be to move. We could get a similar sized house in a less desirable area but still close enough to DCs school, and it could knock over £100k off the mortgage 😯 in a worst case scenario of 9-10% interest rates that could save us £900+ per month so we could seriously consider it. However if rates do go and stay that high then surely the world and his wife will be looking to downsize?