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Ask an Expert If my 100% mortgage scheme is coming to an end, should I use my savings to reduce my mortgage loan amount?

If my 100% mortgage scheme is coming to an end, should I use my savings to reduce my mortgage loan amount?

Q: We took out a 100% mortgage in April 2008 (just before the products were withdrawn from the market) and I belive the property value has retained its purchase price due to its location – which is around £378k. We have now moved from the fixed to tracker r

A:

I think yours is a very interesting question, and there are a large number of people who are in a similar position to yourself. I have to start by making it clear to you that although I am a fully qualified mortgage adviser, I’m not authorised to give you any advice about where to invest your savings as I am not qualified to do so. My advice would be as follows:- 1) If you can achieve a better return on your savings than the 2.50% interest rate that you are being charged for your mortgage, then you shouldn’t use your savings to reduce your mortgage balance. You should shop around and/or speak to your Independent Financial Adviser to make sure that you are receiving the best possible rate of return for your savings. 2) If possible you should always try to keep the equivalent of 3 months of your net income as savings to fall back on to cover any emergencies. You should also make sure that you have protected your income against accident, sickness and redundancy. 3) You should make the most of your current low mortgage payments by putting aside the difference between what you had been paying originally for your mortgage, and what you are paying now. You could use these savings to add to your savings pot. 4) To protect your mortgage payments against interest rate rises, under the circumstances that you were unable to remortgage onto a fixed rate due to having insufficient equity, another option we could look at is a general insurance product that you could use to protect your mortgage payments against interest rate rises over the next 2 years. By paying taking out one of these policies you could ensure that your mortgage payments would not increase above 3.5% for 2 years. I would be happy to give you a quotation for one of the above policies, and to have a chat about your situation in some further detail. Call me on my direct line, 020 75194909 or email me at caroline.burke@largemortgageloans.com

These questions are for information purposes only and do not contain all the details you need to choose a mortgage, ask one of our advisers for a personalised key facts illustration
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