Strategy for new house: mortgage & mortgage protection

P

Polestar

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I have set up the strategy below to buy my new house:

1. I need a new mortgage of X.

2. I have a term deposit of Y, maturing before the end of the year.

3. I cleared my old mortgage recently, but I still have the mortgage protection policy, which will cover approximately X.

4. I need X+Y to buy the house, but cannot touch Y yet.

5. I should have no problem getting a mortgage for X+Y, which will be variable interest rate so that I can pay off Y as soon as it is available.

6. Get new mortgage protection policy to cover X+Y for a few months until mortgage comes down to X after paying off Y and then cancel it to reassign and leave old policy in place.

Does this sound OK or have I missed something?

EDIT: A family member may be able to lend me Y. It would make things a lot simpler. Or would it? I could get a smaller mortgage, which I could fix straight away, avoid the new insurance policy, and return Y to my relative fully in a few months.

I presume that If I go with the family loan, I will have to tell the bank during the mortgage application that I will be doing that, won't I?
 
Get a quote for the x+y policy. It might be cheaper than your existing.

But borrowing less immediately gives you A lower LTV so borrowing from a relative is best.
 
Brendan Burgess said:
Why on earth do you have a term deposit when you might be moving house?
Click to expand...
I received an inheritance last year. I didn't know what to do with it, so I put it on a 1-year deposit.

Moving house wasn't even on the horizon then, but a great opportunity has presented itself...

EDIT: I did clear the mortgage before I put the rest on deposit!
 
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Depending on the amounts of X&Y I'd possibly be leaning towards a mortgage rather than borrowing from a relation. Specifically a mortgage offering cashback. 2% on the full amount will go a long way to offsetting -and possibly more - those higher interest payments while you wait for your deposit to mature. But like I say crunch the numbers first.

In the greater scheme of things mortgage protection won't be a major cost but I wonder can you stack your mortgage protections? Can you get a new policy for just Y and use that and your current X policy to satisfy the lenders requirements. That might find it too fiddly or might not. But again that assumes your existing policy is cheaper than a new one. Best thing is to price all options.
 
Unless X and Y are in the millions then the savings from your convoluted plan above are very small.

You don’t say your age but the older you are the more hoops you generally have to jump through to get life insurance.

Just redeem Y early and buy the house with it.
 
If anyone can confirm I would really like to know if it is possible to stack existing and new mortgage protection policies when taking out a new mortgage as user Skrooge suggests?
 
Thank you all for the replies!

X and Y are not in the millions! In fact, they are low enough to not qualify for any cashback! X+Y would be just about €250k. But it's either a higher mortgage on a variable rate or a lower mortgage on a green fixed rate. Both are excluded from any cashback offers I have seen with the lenders I would consider.

I'm in my early 50s. I took my insurance policy almost 7 years ago.

If I cancelled my current policy and went for a new one I would be paying €3 more per month on the lower mortgage.

A new policy for 3 months on the higher mortgage would be around €100 in total until I cancelled it.

I will ask the lender if they will consider two policies in the case of the higher mortgage.

NOTE: I just remembered that one of the two 1-year term deposits I opened was specifically to pay 18 years of UK voluntary NICs at class 3. I didn't think they would accept my application to pay class 2, but they did. I paid for those from regular savings.
 
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