Pay some off mortgage or keep as savings

[Pepperwand]

My DH and I were going to buy our dream house last year but it ended up falling through and as I was heavily pregnant at the time and with Brexit we decided to stay put. Moving would have cost us around £20k and we still have that money in savings.

In a way the house move not happening was a bit of a blessing. We were primarily moving for schools as our local did not have a good Ofsted and DC1 starts next year. However it has just been inspected and received a good rating, it's less than five minutes walk from our current house.

We would still like to move to somewhere bigger but we don't HAVE to move. We've got a small 3 bed but our DC each have their own room, even if small singles. We'd be moving for "nice to have" things like a downstairs toilet and a guest bedroom.

I personally have been thinking we should pay £10k off our mortgage (around £170k and 20 years left) and keep the rest in savings. DH thinks we should keep the whole lot aside so we have the money to move when we decide to. We don't have any other debts....WWYD?

What's your mortgage rate compared to what you could get in savings.

Chances are that if you are on a decent rate, you can earn as much if not more in savings so it's best to keep the money in savings especially if extending your current property could be an option, you'd have money towards it rather than having to borrow.

Mortgage rate is 2.64% currently fixed until 2021. Not sure what our savings rate is but I think it's pretty poor, it's just in a standard savings account attached to our joint current account.

Sadly extending isn't an option where we are due to the size and position of the plot otherwise we'd definitely have considered it.

You're unlikely to beat that rate in savings. When you say 'moving will cost £20k' what costs are you anticipating? A lot of them you don't actually have to pay in cash, it's all sorted as part of the new mortgage, so in that case I'd probably pay off the £10k and you can always borrow it back later if you move and it's likely to be cheaper that way.

Would you really need more than £10,000 up front as moving costs?

Estate agent pay on completion. Solicitor pay on completion, plus some for searches etc, but much less than £1,000. New mortgage arrangements fees unlikely to be more than £1,000? Removals - if you’re not going far it’s not a huge cost.

I’d reduce my mortgage by at least £10K.

I was imagining stamp duty costs as an additional cost, that would be £10k on the house price we were buying....or do people typically add this cost to the mortgage they take out?

What about your retirement savings? You could put £4K each into a lifetime ISA (for example) and the U.K. Gov will boost that to £5k for free.
So you’d be saving £10k towards your golden years for the bargain price of £8k and it will accrue the next 30-40yrs until you retire.

The mortgage is low interest, so I would leave it because you need deposit money not tied up in a house if you find a dream home at an awesome price.

So the remaining £12k I’d put into something you can easily liquidate maybe split it between a cash ISA and stocks ISA depending on your risk tolerance.

I'd keep 6 months of expenses in savings.
Then pay the mortgage.
And ensure regular payments to pension.

Thanks all that is food for thought. We do both pay into pension pots and have done since we started working. DHs is the bare minimum percentage wise but is on a good salary (£65k). I work part time and earn £20k but employer has a good pension plan and I pay in an AVC.

I think there's a lot of uncertainty in the housing market around Brexit, certainly things don't seem to be moving as quickly as they were but we would definitely like to be able to move if a great house came up.

I would look at the ISA mentioned up thread. Can you consider an extension/loft conversation in the future rather than moving?

Stocks and shares isa. Look at Vanguard. Or pay off mortgage. I made a 15% increase on my shares this year but it's higher risk than mortgage.