Which one would you choose?

leopardo_2

Hello

I've been a regular reader of these boards but never posted... there seems to be some very nice people on here offering good advice so I thought I'd pick your brains!

A bit of background. My girlfriend and I are buying our first place together, and I'll be letting out my current home. Purchase price of 120k with a 24k deposit. I've met with a few mortgage advisors and been made aware of numerous products and I'm torn between which to go for. These are the basics of the deals:

One of two SVR deals at either 5.44% or 5.49%, repayment over 30 years, no arrangement fee, no early repayment charges (don't have details of val fee to hand)
Or
A 2 year fixed rate with C & G at 5.69, repayment over 30 years, £995 arrangement fee, £270 valuation fee

We can afford the repayments on both as they stand so that isn't the concern. I'd like to get people's views on SVR deals that look quite attractive at present. Whilst we can get out at any time if it goes up I'm a bit concerned that we'd be losing equity in the house over the course of the next year and it will be difficult to get a decent mortgage rate with less to put down. At least with a fixed rate we know what we are paying each month and don't need to worry for two years by which time the housing market will have steadied.

Obviously no-one really knows what is going to happen but any thoughts on the above would be greatly appreciated and what people view as the best deal. Also, if you know of any other deals that are available that would be great too!:D

Cheers!

Joe_Bloggs

Wait until Thursday for the Bank of England rate announcement before deciding. Perhaps wait until the next budget before making such an important decision.
J_B.
Those rates are 'pants'.
Not a mortgage adviser.

Robert_Sterling_3

You already have one property which may lose equity over the next year or more. Why get another?. Why not live in your own property?

catriona69

I'd go for the SVR if you decide to go ahead.

But, to be honest, I just wouldn't buy right now if you don't have to. Just wait for prices to fall and buy in a year or so.

leopardo_2

Thanks for the responses so far.

I agree the rates aren't the best and yes prices are likely to drop further but this is a considered decision we've made. We are currently living in the house I own but I bought it with a friend as a long term investment and I'm also renting out 3 of the rooms. We plan to get married in the next year or so and sharing with my tenants, whilst I get on well with them, is becoming difficult. I'm not worried about losing equity in my current house as my friend and I intend to keep it long term and use the rent to pay off the mortgage. I think sometimes things have to go beyond just a straight financial decision. We can afford to move, we absolutely love the place we are buying and we will spend at least the next couple of years living in it and be really happy. I know this purchase won't cripple us financially and if we move on in a couple of years and it has lost equity it is in a great location to rent out til hopefully things recover.

Hope that bit of background helps you to understand my thoughts on this. We don't HAVE to move, but we will be really happy if we do and that is really important as long as we can afford it-I wouldn't get a 100% mortgage or anything foolish (well I couldn't right now if I wanted one!) for the sake of us getting our own place. I just want to get the best deal I can out of a not particularly great bunch. Good shout on waiting til after Thursday by the way.

Cheers!

catriona69

In that case have you considered renting for the next year or so? I hear it's a good time to haggle down rent and you can save more deposit for a new mortgage whilst watching house prices fall. Win win!

Stroof

Go for it, if the market hasn't reached the bottom yet it must be getting pretty close, so take the risk now, snap up your bargain property and mortgage yourself to the max - in twenty years time you will look back on it as the best move you ever made. In the meantime you should be able to rent your other property for more than the mortgage is costing, and help to subsidise your new venture.

Quite why the best SVR is 5+% when BoE base rate is 1.5 % or 2% is madness. It never seemed fair when SVR was BBR + more than 1%, but at +4% it is robbery.

leopardo_2

Stroof - I don't plan on mortgaging myself to the max but thanks for the enthusiasm! Agree that the SVR rates are a rip-off. My other place is more than covered by the the rental yield and I'll have another room to rent when I leave so I'm not to worried about that. It's annoying as I'm on an SVR with that now at 3.99%... won't get that rate on my new purchase!

Catriona - we thought about renting but there are no gaurantees that prices will have bottomed out in the next year or that there are going to be better mortage deals. Besides, for the amount we'd be paying on the mortgage it would be the same as renting anyway roughly and at least we'd be paying off our own mortgage rather than someone else's. And we wouldn't get this place either.

I think just writing about this has helped me make up my mind anyway. I'd rather have a bit more certainty in these uncertain times and I think I'm going to go for the fixed rate...

catriona69

leopardo wrote: »

Catriona - we thought about renting but there are no gaurantees that prices will have bottomed out in the next year or that there are going to be better mortage deals. Besides, for the amount we'd be paying on the mortgage it would be the same as renting anyway roughly and at least we'd be paying off our own mortgage rather than someone else's. And we wouldn't get this place either.

Except you might buy a place, spend the same on mortgage repayments as you would on rent and then lose money on the house if prices continue to fall. We don't know if we're anywhere near the bottom of the market yet or how high prices will get back up to in 5-10 years time.

But it's up to you, obviously. if you don't mind taking the risk that you will lose money, go for it.

leopardo_2

The thought of waiting isn't really important to me as this is something I want to do now with my partner so we can settle down in something that is ours. Does the financial state of affairs worry me? Of course it does, hence me trying to get the best deal now. The fact is I could wait forever for a better deal to come along, and it's likely it will, but no-one, not even the people that run this country know what is going to happen. I think making an investment that we can afford is always sensible regardless of the market.

"Except you might buy a place, spend the same on mortgage repayments as you would on rent and then lose money on the house if prices continue to fall."

I might also get run over tomorrow or something equally bad. With respect, the thread wasn't about whether or not I should buy - I am in no doubt about that as it is a long term investment also - not a flash in the pan that will lose money without doubt over the next year that I can't recover. I'm just trying to gauge people's impressions over what they feel will happen with SVR mortgages over the 2 years compared to fixed rates.

spuds_2

Wait until next week and see if rates drop. If you are committed to buying that particular property you probably need to act soon, I guess. Otherwise I would say wait a few weeks and see if any better fixed rates appear. If you go with SVR you need to be able to get out of it if necessary. My impression is that some lenders will not pass on Thursday's cut, if there is one.