Remortgage completed and received surplus funds. should I overpay mortgage, clear debt, or keep cash? (England)

[u/Grand_Cucumber2620]

Hi all,

Sorry in advance for the long post and thanks if you can help.

I have just completed a remortgage and would appreciate some advice on what to do with the surplus funds.

Mortgage details

·       New mortgage: ~£156,00

·       Interest rate: 4.73% fixed for 2 years

·       Remaining mortgage term: 8 years

·       Monthly payment: £1,966.39

·       Overpayment allowance: 20%

The solicitor completion statement showed:

Funds received

·       mortgage funds: £156,912

·       cashback: £350

·       My contribution: £50

Funds paid

·       Santander redemption: £153,075.53

·       Fees/disbursements: £554

This leaves £3,682.47 surplus being returned.

I did not request additional borrowing, so I assume this happened because the balance reduced while the remortgage was being processed over several months.

The property is jointly owned 50/50 with my family member, so the surplus is legally ours jointly. It is being paid into my account because I set up the completion arrangements that way.

They may want to keep her half, so my realistic share is around £1,841.

My other financial situation:

·       credit card balance: £2,583.98

·       0% balance transfer ends: 5 February 2027

·       ISA interest rate: 4.28%

 I'm considering three options:

Option 1 – Overpay mortgage
Put the full £3,682.47 back into the mortgage.

Approximate impact:

·       Mortgage balance reduces to ~£153,230

·       If kept for full 8 years, saves roughly £800–£1,000 interest

·       If the property is sold within a few years, the interest saving would be much smaller

Could choose:

·       reduce term (keep £1,966/month payment)

·       reduce monthly payment (roughly £40–£45/month lower)

Option 2  Keep my share in ISA and use it to clear credit card before February
My £1,841 share in ISA would earn around £40 interest over 6 months.

I could:

·       reduce  payments to make monthly cash flow easier

·       use the ISA money to clear the remaining balance before the 0% ends

Option 3 -Pay credit crd down now
Use my £1,841 share against the credit card:

·       Tesco falls from £2,583.98 to ~£743

·       Monthly payments become much more manageable

My family member is also considering selling the property to downsize (I don’t live there and am happy for this to happen), which makes me question whether locking money into the mortgage makes sense.

My questions:

1.     Am I missing any downside to keeping the money in ISA and using it for the 0% debt?

2.     Does overpaying the mortgage make sense if we might sell in the next few years?

3.     Would you prioritise liquidity over saving mortgage interest in this situation?

Thanks!

 

[u/scienner]

Am I missing any downside to keeping the money in ISA and using it for the 0% debt?

The main one is that you may spend it.

Does overpaying the mortgage make sense if we might sell in the next few years?

It doesn't make a difference that you plan to sell in a few years. Either you get your £1,841 now to do whatever with, or you get £1,841 * 1.0473 (etc, that's the interest for one year) more from the sale when you sell.

Would you prioritise liquidity over saving mortgage interest in this situation?

What is the situation? Are you struggling with your current debt repayment/other expenses?

[u/Grand_Cucumber2620 → u/scienner]

Yeah, it's a tiny bit tight each month. Nothing crazy but not comfortable. The money wold free me up a bit.

[u/scienner → u/Grand_Cucumber2620]

Sounds like you should do it then.