Thanks for this. I believe I would be saving more by overpaying mortgage.3.5% on 6 month / 1 year fixed rates pre-DIRT: https://www.askaboutmoney.com/threads/term-deposits-fixed-lump-sum-savings.101813/
Proof if ever we needed it that banks solely exist for their own benefit and been attentive to customers needs or requests come rock bottom. I've always felt it prudent to keep savings where possible even at the detriment of paying a high % on small loans.I used to look at this from a mostly mathematical perspective. However from recent experience if you are likely to need cash in the future the financial benefit does not outweigh the inconvenience and stress of dealing with the banks to get your money back in my opinion.
In my scenario, I overypaid a lump sum on my mortgage in the region of 75k a few years ago knowing that in 2 years I would need the cash for home improvements. I naively thought doing an equity release would be easy....it was not. It took 4 months, countless unanswered emails, phonecalls and one formal complaint to get the equity release over the line. My financial position had improved in the 2 years.
The bank was very quick to take my overpayment but not so quick in returning it. As the op is looking to trade up in a few years, the op should carefully consider just saving the 20% deposit and removing the reliance on bank to an extent.
Off topic: one point about trading up.
Don't you need to have 20% deposit in cash?
Having large equity in first house is great, but until first house is sold, the owner can't get their hands on that equity to use as cash deposit for second house.
I think Im in a similar state of mind myself. I would ideally like the savings account to be with a more reputable bank with decent credit rating. It is very easy to overpay the mortgage as things stand. But if deposit interest rates continue to rise during this year I'll definitely consider switching over to savings.10bps might not be enough for me to overcome the cons. I would have to think again though at 35 or 60bps.
Won't I need to sell my current house anyway prior to trading up? I can't see a bank letting me take out c 3.5x income mortgage when I already have an existing mortgage on my current house. Unfortunately bridging loans no longer exist so it seems impossible to me to trade up without first selling current home. So I don't see any advantage to having the 20% sitting in cash from a trading up point of view.
I think Im in a similar state of mind myself. I would ideally like the savings account to be with a more reputable bank with decent credit rating. It is very easy to overpay the mortgage as things stand. But if deposit interest rates continue to rise during this year I'll definitely consider switching over to savings.
Won't I need to sell my current house anyway prior to trading up? I can't see a bank letting me take out c 3.5x income mortgage when I already have an existing mortgage on my current house. Unfortunately bridging loans no longer exist so it seems impossible to me to trade up without first selling current home. So I don't see any advantage to having the 20% sitting in cash from a trading up point of view.
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