interested21
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I'm currently in a position where I could pay off half my mortgage today, and pay off the remaining half over the course of next year. I'll be looking to trade up in the next 2-3 years, and I'd be building up a deposit for that at a rate of roughly 10% of house value per year. Here's some rough numbers to illustrate this:
Existing mortgage: 200k @ 2.6% (fixed for another 2.5 years)
Cash available: 100k
Saving rate: 100k per year
New house value: 1m
I'm keen to avoid a chain by buying the new house before selling my own. I think this will massively reduce the stress of the whole process. So I see myself as having two options:
Something that I think would really change the outlook would be if I could get an exemption from having to have the full 20% deposit. That would make option 1 the obvious choice to me, as it would mean I'd be mortgage free and able to purchase in '23. How common are exemptions for 2nd time buyers, or are these usually reserved for FTBs? I'd like to think I'd be a good candidate for the bank, seeing as I'd be paying off a large chunk of the mortgage once I'd sold my current house.
Existing mortgage: 200k @ 2.6% (fixed for another 2.5 years)
Cash available: 100k
Saving rate: 100k per year
New house value: 1m
I'm keen to avoid a chain by buying the new house before selling my own. I think this will massively reduce the stress of the whole process. So I see myself as having two options:
- Pay off my existing mortgage by the end of 2022. Save the 200k deposit for the new house over the course of '22 and '23
- Advantage: My money isn't just sitting in my account, its reducing the interest I'm paying on my existing mortgage (this is probably mostly psychological though, the interest bill is small and I'll have some fees to pay for overpaying). Also, I'll be mortgage free going for the next mortgage, so that might make things less complicated
- Disadvantage: It'll be 2024 before I'm in a position to purchase
- Keep building cash for the deposit
- Advantage: I'll have the deposit ready a year earlier
- Disadvantage: Existing mortgage will reduce the max size of the new mortgage (I think?). The cash will be burning a hole in my pocket sitting in my account instead of offsetting my interest bill
Something that I think would really change the outlook would be if I could get an exemption from having to have the full 20% deposit. That would make option 1 the obvious choice to me, as it would mean I'd be mortgage free and able to purchase in '23. How common are exemptions for 2nd time buyers, or are these usually reserved for FTBs? I'd like to think I'd be a good candidate for the bank, seeing as I'd be paying off a large chunk of the mortgage once I'd sold my current house.