How long to fix for?

NewHouse_3

I am trying to decide which mortgage deal to go for and over how long. Bit of background - I currently have 3 defaults from 2004 on my credit file and some arrears from 2005 which have now been marked as satisfied. The best deals my IFA says he can get me are from my current provider and he is advising me to fix for only 2 or 3 years as the deals are very good and the LTV is relatively high in today's market anyway, at 85%. Mortgage company reckons I am about 82% LTV in my current flat vs mortgage outstanding but that is not taking account of the improvements I have made to it.

However, I am not so sure the shorter term fixes are such a good idea, even if I am planning on moving both shortly as soon as my flat is sold, and then hopefully again in 2011. By this point all the defaults will be cleared from my history and as everything else is up to date, there will only be the satisfied arrears left. This should hopefully mean I can get a better mortgage rate and a higher LTV (if the market has picked up by then) and move to the larger house that I really want in the long term. At the moment I just have to buy the best that I can afford.

At the moment I can remortgage my flat on a 2 year fix ending March 2011 at 5.19%, 3 year fix at 5.59% ending March 2012 and 5 year fix ending March 2014 at 5.79%. I am currently paying a variable rate of 6.19% so all the products are cheaper than that and there are no extra fees to move onto these deals and also to port one of these deals to the new house. The 2 year deal would end just as I was thinking of moving in 2011, but I am unsure if the market will have recovered by then? Any predictions if I am likely to be able to get a better rate for a higher LTV in just 2 years?

I only fixed for 2 years this time and do regret it slightly as there were no decent deals when I went to remortgage and I could have done without the extra cost per month but I could still afford it. For that reason the 3 and 5 year fixes are quite appealing even tho they cost more rate wise and if I do move in 2011 and choose another mortgage provider I will have an ERC of 4% on the 3 year deal and 5% on the 5 year deal. Upside being I know what all my monthly repayments will be and will benefit fully from any pay rises without worrying that my mortgage is also going to rise. And I may not want to move in 2011 as planned.

Think I'm just really wondering what everyone thinks the house prices, market and available mortgage deals will be like in 2011? And an opinion on what the best deal for me to go for might be?

Thanks in advance,

Jaz

feisty1

I would be very surprised if you were offered these rates you're referring to even if it is with yr exisitng provider. I know of cases where existing providers are not offering deals to existing customers The credit file maybe fitted the criteria several yrs ago when u went with them but many have changed criteria, leaving clients no other option than to stay on SVR, simply because we have had such a reduction in sub prime lending.

NewHouse_3

Should probably have said I already have it in writing from them I will now be treated as if I didn't have any credit problems. The mortgage I took out was a "credit repair" package and as I've had no further problems and all payments are up to date, they will offer me a switch to their "normal" products with better rates. I have also had my IFA confirm this with them over the phone about 2 weeks ago. I just need to decide which product to choose.

feisty1

Is this accord?

dimbo61

As you have already said 2 years seem to flyby so why not go for the 3 year deal as this gives you longer to build up more equity in your property and if allowed you could overpay as you are already paying the mortgage at 6.19% and hopefully clearing all other debts.
overpaying and saving an emergency fund in cash ISA,s who build up the equity in your home and help pay for fees in the future. GOOD LUCK

NewHouse_3

feisty1 wrote: »

Is this accord?

You're good ain't ya?! Yes it is. Is that a help or a hindrance?

Dimbo thanks for the suggestions, that was something I hadn't considered - if I go for the 3 or 5 year fix I could potentially overpay enough to wipe out the ERC if I need to switch to another lender. Either of the deals on offer will see me paying about 25% less per month than I do at present so theoretically as I know I can afford the repayment, I may leave the direct debit at that level and see what happens. Off to do some sums!

Thanks both.

boyse7en

I'd be inclined to fix for the longest period you can afford to. Most people (including banks) are expecting house prices to continue falling over the next 12-24 months. If you take out a 2yr fix, you might find it difficult to re-mortgage at the end of your fixed term as the LTV will be too high.