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  • FIRST POST
    • Jaffapig
    • By Jaffapig 9th Sep 17, 9:56 PM
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    Jaffapig
    What to look out for in a mortgage?
    • #1
    • 9th Sep 17, 9:56 PM
    What to look out for in a mortgage? 9th Sep 17 at 9:56 PM
    Hi, I'm a first time buyer with a large deposit looking for a relatively small mortgage (LTV about 31%) as this suits my circumstances for the coming several years. I have read the MSE first time buyer guide but it's left me more unsure than when I started!

    I'm having difficulty formulating the right questions to ask, but essentially are there some obvious things I should be looking out for? My main thought is that it is very important to me that there aren't any penalties for overpaying since I will have the capacity to do so.

    I will likely want to move in approx 5 years and will want a larger, joint mortgage with my partner (not appropriate currently). Is there anything I could be caught out by in this scenario in terms of making over payments or moving before the end of the initial term? I've found mortgages from Nationwide with no over payment or exit fees (2yr and 5yr tracker mortgages). But could I get caught out trying to move house with a new and totally different mortgage if I left before the 5yr term even though it says there are no exit fees, for example?

    As far as I can tell it still makes sense to overpay even if I will likely be getting a bigger mortgage in future, I’m not going to lose any of the value of overpaying?

    The 2yr tracker has a minimal fee whilst the 5yr is best part of 1k. Though over 5 yrs they work out pretty similar in total cost at current interest rates so does it really matter (excluding the matter of what interest rates are likely to do)?

    Obviously I can discuss these questions with Nationwide or whatever lender but I'd like to be more clued up before that.
Page 1
    • ACG
    • By ACG 9th Sep 17, 10:44 PM
    • 15,785 Posts
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    ACG
    • #2
    • 9th Sep 17, 10:44 PM
    • #2
    • 9th Sep 17, 10:44 PM
    I took out a mortgage with no ERCs through nationwide last year - knowing I would be moving this year and buying with my partner. There were no ERCs to pay.

    Write down a list of what is important to you - part of my factfind I go through with clients is to discuss this sort of thing. We do have a generic set of questions but they are just a starting point to get the discussion and thoughts flowing.

    Once you have your list, you then know what you are looking for. You say overpayments are important, pretty much every lender allows you to overpay by 10% of the balance p.a - so do you plan on overpaying by that amount or more? If more, then you probably do need one with no ERCs, if less then why limit yourself?

    If you plan on moving within a certain period, ensure there are no ERCs within that time frame if you can.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Lilla D
    • By Lilla D 9th Sep 17, 10:45 PM
    • 316 Posts
    • 161 Thanks
    Lilla D
    • #3
    • 9th Sep 17, 10:45 PM
    • #3
    • 9th Sep 17, 10:45 PM
    Why don't you speak to a broker, especially if you are clueless according to your own admission?

    Just to note, if you're not looking to move in for 5 years or so, then the deals you're looking at from Nationwide are not the ones you'd get. If you don't move in, but you'd let the property instead, then it's a BTL mortgage and it's Nationwide's sister company (TMW) who deals with that at completely different rates and fees. However, as you'd be a first time buyer first time landlord, they wouldn't give you a mortgage. Most of the lenders wouldn't.

    Forget the part above - I've just re-read the original message and realised that you didn't mean that you wouldn't move in for 5 years, but that you wanted to move after 5 years. In that case indeed you'll just have to assess your needs and whether you'd overpay by more than 10% per annum or not.

    In any case, please just speak to a broker. As ACG says, during the fact find part of the process there will be a discussion, which will help you as well as the broker to find a suitable solution.
    Last edited by Lilla D; 09-09-2017 at 10:54 PM.
    I am a Mortgage Broker
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • ACG
    • By ACG 9th Sep 17, 10:51 PM
    • 15,785 Posts
    • 8,078 Thanks
    ACG
    • #4
    • 9th Sep 17, 10:51 PM
    • #4
    • 9th Sep 17, 10:51 PM
    Why don't you speak to a broker, especially if you are clueless according to your own admission?

    Just to note, if you're not looking to move in for 5 years or so, then the deals you're looking at from Nationwide are not the ones you'd get. If you don't move in, but you'd let the property instead, then it's a BTL mortgage and it's Nationwide's sister company (TMW) who deals with that at completely different rates and fees. However, as you'd be a first time buyer first time landlord, they wouldn't give you a mortgage. Most of the lenders wouldn't.

    So please just speak to a broker.
    Originally posted by Lilla D
    Unless I have misread - which is very possible as I have been up since 4am with a teething baby - I read it as move now and then again 5 years?
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Lilla D
    • By Lilla D 9th Sep 17, 10:55 PM
    • 316 Posts
    • 161 Thanks
    Lilla D
    • #5
    • 9th Sep 17, 10:55 PM
    • #5
    • 9th Sep 17, 10:55 PM
    No, ACG, I also had a tiring day with my little one, so I think I was the one misreading the original message...
    I am a Mortgage Broker
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Jaffapig
    • By Jaffapig 9th Sep 17, 11:25 PM
    • 4 Posts
    • 0 Thanks
    Jaffapig
    • #6
    • 9th Sep 17, 11:25 PM
    • #6
    • 9th Sep 17, 11:25 PM
    Aha it seems perhaps I've misunderstood the difference between ERCs and overpaying?

    I'd assumed early repayment charges were fees for any kind of repayment, does it only refer to full repayment of the entire mortgage? Because I don't plan on overpaying by more than 10%, no. Though whether or not there are ERCs seems to make little difference to the overall cost of the mortgage over the long term in the comparison of mortgages I've been looking at.

    I'd been against a mortgage broker because it seems like extra expenditure which wouldn't be necessary if one was informed enough. Obviously I need to get much more informed than I am now (be kind, it's only my first day looking into it all!) but no one I know has used a mortgage broker and I'd hope with enough research it wouldn't be necessary to be honest. I'm really just dipping my toes in the water at the moment tbh.

    Edit - although I've just read the bit about the fees-free brokers in the MSE guide and checking the lenders they don't cover yourself.... interesting...
    Last edited by Jaffapig; 09-09-2017 at 11:33 PM.
    • Jaffapig
    • By Jaffapig 9th Sep 17, 11:28 PM
    • 4 Posts
    • 0 Thanks
    Jaffapig
    • #7
    • 9th Sep 17, 11:28 PM
    • #7
    • 9th Sep 17, 11:28 PM
    Thank you all btw. Yes for clarity I'd be moving now with a mortgage on my own, then move again in roughly 5 years (most likely a joint mortgage at that stage).
    • getmore4less
    • By getmore4less 10th Sep 17, 2:14 AM
    • 30,302 Posts
    • 18,118 Thanks
    getmore4less
    • #8
    • 10th Sep 17, 2:14 AM
    • #8
    • 10th Sep 17, 2:14 AM
    do some reading
    porting
    offset
    term

    most deals coe in a fee/no fee option so understand how to work out the best.
    (your 2yV5y cost about the same over 5y if probably wrong)

    how much are you looking to borrow and pay each month?
    • ACG
    • By ACG 10th Sep 17, 10:43 AM
    • 15,785 Posts
    • 8,078 Thanks
    ACG
    • #9
    • 10th Sep 17, 10:43 AM
    • #9
    • 10th Sep 17, 10:43 AM
    Most mortgages allow overpayments of around 10% per annum free of charge. Anything over and above that will incur ERCs.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Jaffapig
    • By Jaffapig 13th Sep 17, 7:37 PM
    • 4 Posts
    • 0 Thanks
    Jaffapig
    do some reading
    porting
    offset
    term

    most deals coe in a fee/no fee option so understand how to work out the best.
    (your 2yV5y cost about the same over 5y if probably wrong)

    how much are you looking to borrow and pay each month?
    Originally posted by getmore4less
    Sorry I started replying at the weekend, then got distracted and totally forgot to finish!

    Thank you I will look those terms up. I'm looking to borrow £50,000. Repayments hover around the £200 mark for the initial period, up to around £250 or greater after that period based on current interest rates. I'm looking to overpay perhaps at least £100 a month, depending on the month. Lets just say an average of £150 - so won't exceed 10% anytime soon (is it 10% of the initial mortgage value or of the remaining value owed? I'm guessing the second.)

    The 2yr vs 5yr calculations I did varied by a bit under £700 at the end of the 5yr based on current interest rates. I was reasoning that I didn't know what interest rates were going to do so I can't predict whether or not it would make sense to pick one or the other, as one is cheaper than the other at the 3yr mark, whilst by 5yr this flips round - Im not 100% what I'm going to be doing in terms of moving on again. I'm fairly confident I worked it out right (you have me doubting myself!) I did:

    "Set up fees" MINUS "cashback incentive" PLUS (cost per month of initial term x number of months of term) PLUS (cost per month after initial term x number of months to take it up to 5 years)
    Last edited by Jaffapig; 13-09-2017 at 7:43 PM.
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