How to maximise my deposit

[inthenameotheweeman]

I bought my flat through the RTB scheme this year, for £10750 less than the valuation. I know many people don’t agree with RTB, so sorry if anyone is offended by that, but I did what I felt was right for my DS and I.

I don’t want to live here forever, and since purchasing, I’ve been very lucky to get a slightly better paid job and be in a position to increase my earning potential over the next few years.

My question is, what is now the best way to save towards our next move? Should I overpay my current mortgage, spend money upgrading the flat we are in, (started that anyway) or just plug away at normal saving? Or combine the 3?

Thanks.

We have done all 3. Along with HPI we now have 70% equity after 7 years because I did prioritise reducing the mortgage in the early days as I hated the debt and threw any disposable income at it.

The HPI has been crazy but if that was removed were at almost 50% of purchase price still in equity.

We've also done lots of maintenance to the house (1915 build) but haven't done electrics as I just can't face that mess!

So I would make sure you have some cash savings for emergencies then overpay mortgage as much as you can.

Thanks Green. I need to check first of all that my mortgage lender will let me overpay as I believe not all mortgages allow that. But if so, I’m considering starting that come January.

What is HPI? 

House price inflation - values going up without you doing actually.

Ah, thanks Wow.

With regards to upgrading the property, it depends on the value. If it's quite cheap, then you might only break even given the investment you'll need to make. If you're likely to add value through upgrades, then they'd make sense.

Depending on your mortgage interest and how soon you're looking to move, it might make sense to overpay the mortgage or put savings into stocks and shares ISAs. The latter will give you more flexibility and couple give yields higher than mortgage interest but is susceptible to some fluctuations in the market. So might not be a good option if you're looking to move quite soon, e.g. in 3 years.

When it comes to overpaying the mortgage, you'll need to check with your lender but they often allow up to 10% of the outstanding balance.

I’m not sure about the upgrades, but I have already done up the bathroom, the living room window is next, and then the kitchen. These are things that will make it nicer/more comfortable for us to live in for the next 2+ years, and I’m hoping will add a little.

I bought the flat for £32500, over a 15 year mortgage, with interest rate of 3.14. I can’t put it on the market until April 2020.

Joni when you talk about 10%, is that per year? I’m hoping to increase my payments by at least 150 per month?

You'd need to check your mortgage specifically but the 10% means that if you have 30k outstanding, you're allowed to overpay 3k that year. When you're down to 25k outstanding, you can overpay by 2.5k etc.

Thanks Jojo. I’ll look into that this week.