mortgage query, new fix for 5 yrs will low LTV

I will do some numbers later but gut says get a 2y fix on a lower rate.(with unlimited overpayment)

And no fee will be better in most cases.

stolt wrote: »

thanks, yes you were quite right i had the rate wrong way around int he examples, now correct.


The thing with the 2 yr deals is my concern over the rates risiing and i wont be able to pay the mortgage off in 2 years


i have looked at first direct for 2 yr fixed and they have


1.59% no fee - monthly payments £438


and a
1.14% with £1450 fees - monthly payments £420


i guess the bigquestion is rates in two years time and where it would be, i guess even two years cant possibly see a massve rate increase

With those two you are better off with the no fee over that term I believe?

£1450 fee/24 months = £60.41. The monthly payment is only £18 less on the fee paying deal.

With the 1.14% offer you pay a total of £11,530 over two years including the fee. With the no fee rate 1.59% it's £10,512 over two years.

SuboJvR wrote: »

With those two you are better off with the no fee over that term I believe?

£1450 fee/24 months = £60.41. The monthly payment is only £18 less on the fee paying deal.

With the 1.14% offer you pay a total of £11,530 over two years including the fee. With the no fee rate 1.59% it's £10,512 over two years.

you cant use the payment to compare mortgages.

the max you can save on the lower rate is if you are interest only.

2*£90,000*(0.0159-0.114) = £810

repayment will be lower and massive overpayment even lower.

OK got the time to do some numbers

summary/assumptions.

£90k outstanding. (target 5 years.)
£40k gift on its way within a year
£35k might be available.
£900pm amount available for regular payment

For illustration we will use the FD rates
2y 1.59%
5y 1.94%

ok lets go with the starting example a 5y fix with £900pm
in 5 years
£90,000 @ 1.94% £900pm £42,500 interest £6502

That give you the max you can save by optimizing over 5 years as £6500

lets add £40k at end year 1.
1year
£90,000 @ 1.94% £900pm £80,865 £1,665
y2-y5
£40,865 @ 1.94% £900pm £0 £1,612 ( total £3,277)

That is your 5 year plan sorted with a saving of £3200 over the base option. there is some wiggle room there as the last payment is only £200 and if the £40k comes in quicker than a year that saves a bit more.

On that 5y fix with £40k at end of year 1 at the 2 year point you will owe £30,768 ( total interest so far £1665+£704=£2,365)

if you took the 2y fix we have

£90,000 @ 1.59% £900pm £80,563 interest £1,363
£40,563 @ 1.59% £900pm £30,334 interest £571. (total £1,934)

To break even over the next 3 years you need a rate better than 2.9%

lets say the best case it rates don't move then you have for 3 years
£30,334 @ 1.59% £900pm £0 interest £719

total interest is then £2653 a saving of £624 over the 5y option.

now that may be a price worth paying if you think over 2 years rates may go up more than about 1.5%.

Now lets look at a slightly different plan and use the £35k on the 2y fix.
Y1
£55,000 @ 1.59% £900pm £45,002 interest £802
Y2
£5,002 @ 1.59% £420pm £0 interest £43. (total £845)
(lower payment to avoid finishing off before the 2 years are up)

Savings back up to £5,760 at Y2 with 3 years @ £900 to go £32,400

Depending on the timings of the 40k there will be adjustments but that is probably about as good as it gets. and should get that £6500 interest down under £1k.
.......................................................................
If not 100% happy using the kids money I have another option that protects that in that you can get it back at any time.

if you qualify for the offsets, FD do a no fee 2y fix offset @ 2.14%

you start with £90k then offset their £35k to £40k goes in as and when it arrives you can offset the full £900pm

in the first 2 years this will cost

Y1
£55,000 @ 2.14% £900pm £45,282 interest £1082
Y2
£5,282 @ 2.14% £900pm £0 interest £33. (total £1115)

100% offset in 6 months

costs about 300 more for the safety net of access to the money.

you take the deal over a longer term and the cash is there to get back if needed.

once 100% offset the cost is zero.

You could also use Stoozing where you use a 0%(no fees) CC like a purchase deal to offset even more money and get to 100% offset even quicker.

Saving that last £1k will take a bit of extra work over a simple solution.


The 5y plan hinges on the £40k and the £900pm

if you say only had £800pm then the initial 5y fix with £40k at Y1 becomes.

1year
£90,000 @ 1.94% £800pm £82,076 £1,676
y2-y5
£42,076 @ 1.94% £800pm £5,573 £1,897 ( total £3,573)