Overpaying mortgage

[nemesis2001]

We have 240.000 left on a tracker mortgage with ICS (ICB+1.25%). Current negative equaty is 60K. Our monthly repayments are 1269 pm as we've increased repayments by an additional 200 euro per month. Our plan is to move homes in the next 3 years. We would sell the current house and with the savings try to get another mortgage. Question is: with the planned move in 2016, would if be better to try to increase monthly repayments by an additional 200 euro p.m or would it be best to save those 200 Euros and make annual lump payments.
By increasing monthly payments, we're basically reducing the term of the mortgage but if we plan to sell soon, would that make any difference.

 

[lucozade]

I don't think it makes any difference...

 

[Brendan Burgess]

I am not fully sure what the question here is.

You are paying 1.75% interest on your mortgage at the moment. You could probably get a net 1.75% on a deposit account. So, arithmetically, you are just as well paying off your mortgage as putting it on deposit.

Your house is worth €180k and your negative equity is 33% of that. I am guessing that you are repaying around €10,000 in capital a year, so you will have the half the negative equity eliminated after 3 years.

This is not a prediction, but if capital repayments and house price increases over the next 3 years eliminate your negative equity, where will you be then? You will sell your house and you will have no mortgage and no deposit.

I suggest the following to give you maximum flexibility.
Stop overpaying your mortgage.
Save the money instead to build up a deposit. In three years time, you will have around €15,000

Bank of Ireland may allow you to transfer your tracker to a new home. Assuming you are borrowing, say an extra €60,000, it will be at the SVR of 4.8%. If you pay the €15,000 off your tracker in the meantime, you will have to borrow €75,000 @4.8%.

So save your money instead of paying off your cheap tracker.