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Bigger mortgage vs Savings
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Fintown21
Posted: 18 February 2024 19:05:00(UTC)
#1

Joined: 09/02/2024(UTC)
Posts: 2
Hi
Hopefully someone can help me make the right decision.

I’m buying a property for 628k.

I’m debating the mortgage to take out. I have cash savings earning 5.2% with
Ulster bank.

My broker says I can get 30 year mortgage @ 4.2%.

Would you max out on mortgage size and keep cash in the savings account earning interest
And I can then pay down the mortgage using any interest earned thru overpayments.

Any thoughts would be appreciated.

Regards

Chris
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Helen Bess
Posted: 19 March 2024 11:25:13(UTC)
#2

Joined: 14/03/2021(UTC)
Posts: 41

Was thanked: 5 time(s) in 4 post(s)
Considering the interest rates, it might be worth maxing out the mortgage size and keeping cash in the savings account earning interest. You can use the interest earned for overpayments on the mortgage.
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Ad B on 06/04/2024(UTC)
Simon53
Posted: 19 March 2024 12:50:06(UTC)
#4

Joined: 06/03/2019(UTC)
Posts: 47

Thanks: 265 times
Was thanked: 77 time(s) in 31 post(s)
Market commentary seems to be anticipating rates to come down......how comfortable would you be if savings rates say became 3%.

Another thought - albeit one perhaps for a few years time - dont under estimate the psychological benefit of becoming mortgage free / low mortgage in the future (vs being a 'mortgage prisoner' to the lender)
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Thrugelmir on 19/03/2024(UTC), DHardisty on 27/03/2024(UTC)
Thrugelmir
Posted: 19 March 2024 13:03:51(UTC)
#3

Joined: 01/06/2012(UTC)
Posts: 5,330
Helen Bess;300034 wrote:
Considering the interest rates, it might be worth maxing out the mortgage size and keeping cash in the savings account earning interest. You can use the interest earned for overpayments on the mortgage.


How long will you be able to do this for? That's the question. Mortgage rates continue to edge upwards. As borrowers are themselves refinancing onto higher rates, in the process removing their own savings from the market to lend. The QT exercise is slowly and quietly draining liquidity from the financial system.
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D Bergman
Posted: 19 March 2024 13:32:41(UTC)
#5

Joined: 22/03/2018(UTC)
Posts: 1,308

Thanks: 1686 times
Was thanked: 3536 time(s) in 1035 post(s)
Fintown21;296727 wrote:
Hi
Hopefully someone can help me make the right decision.

I’m buying a property for 628k.

I’m debating the mortgage to take out. I have cash savings earning 5.2% with
Ulster bank.

My broker says I can get 30 year mortgage @ 4.2%.

Would you max out on mortgage size and keep cash in the savings account earning interest
And I can then pay down the mortgage using any interest earned thru overpayments.

Any thoughts would be appreciated.

Regards

Chris


If the savings account is not in an ISA, you will be paying 20% tax (assuming you are a base-rate taxpayer) so the real interest you will receive is 4.16%.
So no profit there, and as other posters have pointed out, the interest rate may fluctuate.

In addition to that, you should be able to get a better mortgage rate if your Value to Loan ratio is better (ie, you are borrowing a smaller proportion of the property value).

I don't think the upside of your idea is high enough to be worth the potential downside.
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Guest on 07/04/2024(UTC)
Lex Further
Posted: 19 March 2024 21:56:56(UTC)
#6

Joined: 18/09/2021(UTC)
Posts: 181

Thanks: 1 times
Was thanked: 48 time(s) in 34 post(s)
Consider the flexibility of your financial situation. Once you've put cash into the mortgage, it's not easily accessible. Ensure you have sufficient emergency funds and liquidity for unexpected expenses. When you need a professional answering your question. consider reaching atbs customer service for a help.
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D Bergman on 23/03/2024(UTC)
John Bleke
Posted: 31 March 2024 10:33:56(UTC)
#7

Joined: 06/03/2023(UTC)
Posts: 246
You'll restricting your flexibility with such a long term loan.

I remember fixing my mortgage back in 2008 I think. A three fix at 5.99% when Meryvn King told us rates were going up. A few months later the financial crash happened and some of my friends were on trackers and paid nothing for a few years. A very sore three years for me lol!
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