Would you use savings to lower LTV or keep a bigger buffer in my situation?

[BakersKitchen]

Moving house - suddenly are paying an extra £35k because onward purchase fell through and nothing else available at that price point so money won’t be quite so comfortable as it was on our previous purchase but we still have somewhere between £1200 - £1500 a month leftover after mortgage, bills, childcare, some planned savings (£450), the food shop and discretionary subscriptions (Disney, gym, Spotify etc) as well as budgeting a £200/month float for any unexpected purchases related to our baby which I don’t think is an amazing position but I don’t think it’s terrible either.

We are okay with being a little bit house poor for a while as a bigger house is our current priority and it will hopefully be our forever home.

The new purchase would put us at 78% LTV so we’re looking at a rate of somewhere between 4.7 and 4.9 or £1800/month.

If we can get the LTV down to 75%, we could get a 4.6 which would put our payments at about £1650/month (a big difference).

We HAVE technically got the money (£15k) to do this but it would leave us with only £5k left in the pot for unexpected bills and buying bits and bobs for the new house.

I have £5k credit card debt interest free leftover from buying a new car earlier this year (started at £12k) which I intend to pay down to about £4k before we move and then pay the minimum for a while until moving to another interest free deal next summer.

WWYD? I have budgeted moving costs, stamp duty etc separately.

Personally, I'd do it. If it's a 5 year mortgage it will save you £9K in payments, plus slightly less interest mounting up.

However, £5K is a very small buffer/emergency fund, especially when you've just bought a new house.

Before deciding, I'd work out how long it would take to build that buffer back up to a decent level (eg: 6 months of living expenses) and make sure I had a plan for what I'd do if there was suddenly a significant expense (emergency work on house etc) or redundancy. Eg: if worst came to worst, could family lend you money?

I think we can realistically afford to save £600/month on the lower rate.

We could do more but we do also want to enjoy our lives so it would take 2.5 years to get back to where we started financially assuming nothing major crops up that depletes our pot.

I agree it does feel a bit tight when you put it like that!

I personally wouldn't. We had a strong £25k left when we did our home renovation and then within the year it's gone to £4k due to needing roof repairs, new car (wasn't planned) and child needing private therapy. It feels horrible having such a low emergency fund and building it back up is hard work as things always crop up with kids.