Mortgage brokers & is now a good time?

[Ariosa]

It’s a killer after 9months

It can be, yes.

[WTFH]

I really can't think of anything else than drawing dividends beyond the 7.5% rate...
Or perhaps a loan from my business to myself for a couple of years

It's not what you think - it's what your accountant thinks.
Have you spoken to them?

If you increased your deposit from £40k to £80k, how many mortgage offers would you get?
What reduction in interest rate would you get on the mortgage?
What reduction in monthly repayments would it be?

Factor that in compared with leaving the money in your business, not getting a mortgage and not getting a house - or having to borrow money and stretch yourself riskily just to save a few pounds in tax.

Since you won't get a 90% mortgage, I've just run a few best buy examples based on a £400k property repayment mortgage:
85% LTV will be £1350 a month
80% works out at £1263
75% is £1154

So, by putting in an extra £40k up front, you reduce your monthly outgoings by almost £200. Over 25 years that's £60k.
Play it smart and get an offset mortgage and you put that £200 into the offset account. That reduces your mortgage repayment time down by about 5 years.

...but no, to save yourself paying tax on money that is sitting in your company earning you nothing, you're happy to pay a mortgage for an extra 5 years.

[ladymuck]

So, by putting in an extra £40k up front, you reduce your monthly outgoings by almost £200. Over 25 years that's £60k.
Play it smart and get an offset mortgage and you put that £200 into the offset account. That reduces your mortgage repayment time down by about 5 years.

This. My last mortgage was a base-rate tracker offset with the Woolwich (as was). It also allowed overpayments up to a maximum each year. A brilliant deal I couldn't have gotten without the help of a good contractor friendly broker. I wouldn't go for a base-rate tracker nowadays, as there's not much lower they can go, but I would definitely have the offset facility again if it were available - lots of clever things you can do if you're smart to reduce the interest on the loan and shave years off the term.

[WTFH]

This. My last mortgage was a base-rate tracker offset with the Woolwich (as was). It also allowed overpayments up to a maximum each year. A brilliant deal I couldn't have gotten without the help of a good contractor friendly broker. I wouldn't go for a base-rate tracker nowadays, as there's not much lower they can go, but I would definitely have the offset facility again if it were available - lots of clever things you can do if you're smart to reduce the interest on the loan and shave years off the term.

Our mortgage was with Santander. Put every spare penny into the offset, and when needed took the money out of there.
20 year mortgage paid off in 10.

[northernladuk]

This. My last mortgage was a base-rate tracker offset with the Woolwich (as was). It also allowed overpayments up to a maximum each year. A brilliant deal I couldn't have gotten without the help of a good contractor friendly broker. I wouldn't go for a base-rate tracker nowadays, as there's not much lower they can go, but I would definitely have the offset facility again if it were available - lots of clever things you can do if you're smart to reduce the interest on the loan and shave years off the term.

I used to swear by them. Got hooked back in the day when it IF came out from the Halifax (if that was the right name and bank) but recently I've fallen out of favour of offsets. The last one I had was with RBS at 4% which was quit a bit more than the standard rates. Rates kept dropping and they didn't budge. Figured with rates as they were then, and even more so now, id be better of investing it. Offsetting a 2% mortgage is borderline pointless at the moment.

Obviously I'd you don't want to invest it is still an option though...

[ladymuck]

I used to swear by them. Got hooked back in the day when it IF came out from the Halifax (if that was the right name and bank) but recently I've fallen out of favour of offsets. The last one I had was with RBS at 4% which was quit a bit more than the standard rates. Rates kept dropping and they didn't budge. Figured with rates as they were then, and even more so now, id be better of investing it. Offsetting a 2% mortgage is borderline pointless at the moment.

Obviously I'd you don't want to invest it is still an option though...

I got mine in 2008, just before you know-what-happened, and the timing was bloomin' perfect. Mainly because of the base-rate tracking element.

[Maslins]

I got mine in 2008, just before you know-what-happened, and the timing was bloomin' perfect. Mainly because of the base-rate tracking element.

Ditto for me as FTB. Base rate was something like 5.5%. Just pre credit crunch when lenders were handing out mortgages like sweeties.

We had cash for just a 5% deposit. Opted for a lifetime tracker, and did a credit card balance transfer to get up to 10% deposit. Worked out well, as base rate plummeted, so did our mortgage interest, making it easier to clear off c/c debt quickly. Was slightly annoying that there was a "collar" on the tracker, so it didn't follow base rate right down to 0.5%+, only to 2%+...but still, was great. The flipside was of course property prices stagnated, we were too late to get the chunky annual capital increases of the years before.

Tracker unlikely to make sense now, as base rate can't realistically go down any further...can it?!

[Ariosa]

It's not what you think - it's what your accountant thinks.
Have you spoken to them?

Yes that'll happen soon. Corona has made that difficult lately.

If you increased your deposit from £40k to £80k, how many mortgage offers would you get?
What reduction in interest rate would you get on the mortgage?
What reduction in monthly repayments would it be?

Factor that in compared with leaving the money in your business, not getting a mortgage and not getting a house - or having to borrow money and stretch yourself riskily just to save a few pounds in tax.

Since you won't get a 90% mortgage, I've just run a few best buy examples based on a £400k property repayment mortgage:
85% LTV will be £1350 a month
80% works out at £1263
75% is £1154

So, by putting in an extra £40k up front, you reduce your monthly outgoings by almost £200. Over 25 years that's £60k.
Play it smart and get an offset mortgage and you put that £200 into the offset account. That reduces your mortgage repayment time down by about 5 years.

Agreed, this all makes sense. Better spend 10K more now than 60K in the long run.

...but no, to save yourself paying tax on money that is sitting in your company earning you nothing, you're happy to pay a mortgage for an extra 5 years.

Don't be so harsh
I'm not used to the idea of giving 1/3 of what I draw from my business money to the taxman but I totally appreciate your feedback and it does make sense

[Ariosa]

This. My last mortgage was a base-rate tracker offset with the Woolwich (as was). It also allowed overpayments up to a maximum each year. A brilliant deal I couldn't have gotten without the help of a good contractor friendly broker. I wouldn't go for a base-rate tracker nowadays, as there's not much lower they can go, but I would definitely have the offset facility again if it were available - lots of clever things you can do if you're smart to reduce the interest on the loan and shave years off the term.

OK offset sounds an option, I knew nothing about it
What other things are you referring to? Doing my best to make full use of your feedback, thanks!

[Ariosa]

Our mortgage was with Santander. Put every spare penny into the offset, and when needed took the money out of there.
20 year mortgage paid off in 10.

wow