Long term fix i.e. 25 years

ey_up

Hi guys and gals,

I am a first time buyer with the advantage that my extended period of living at my parents has allowed me to grow healthy deposit. Adding to this my longterm girl friend (albeit someway off 25 years yet!) has a healthy level of savings. This will probably put us in the region of having been 15 - 20% deposit on our target houses with the mortgage being on an approx multiple of 3.5 times earnings. I am, and she will soon be, a qualified accountant, so hopefully from an risk view we should be reasonably ok although I appreciate nothing is certain.

I have looked on the various internet mortgage searches, and I know they are far from perfect, one thing that does crop up is long term fixed rates i.e. Manchester fixed for 30 years and I previously saw a Brittania 25 year fix both at 5.89%.

Now the rate looks tempting from an historic point of view but what are the pitfalls of such a long fix? I very much doubt we will be there for the full 25 year term but the mortgages appear transferable. Would this lock us in to the same mortgage provider in future or are banks reasonably accepting of sharing future security over houses? Anything else I should look out for?

Any ideas would be of great help while I considering options.

Thanks

trynsave

What about overpaying? It was not until we had a mtge for a few years that we realised that we were MFW. A really long fix may penalise you wanting to clear debt early.

unite79

Check out the Manchester deal a bit closer, you will see it is only tied in for 10 years.

silvercar

You would also want to check out portability options. Great to have the security of a fixed rate for 25 years but it is unlikely you will want to remain in one house for that long. The mortgage will hopefully be portable, meaning you could move it to your next home. It [the new mortgage] would still be subject to lending criteria on the new home. The problem I can forsee is that you may want to increase your mortgage at some time in the future, if you are tied to this mortgage the extra borrowing would have to come from the same lender, who may not have good deals available.

Nearly 23 years ago we bought our first property on new graduate salaries at multiples of 2.75 x joint income, that mortgage was a fifth of the mortgage we have now. If we had been constrained to stay with that lender the deal we have now (and those taken along the journey) would not have been available to us.

sarah_elton

trynsave wrote: »

What about overpaying? It was not until we had a mtge for a few years that we realised that we were MFW. A really long fix may penalise you wanting to clear debt early.

Agree with this. When my mortgage was fixed I was limited to 10% overpayments if I recall correctly. Definitely check the limit. Although a fixed rate could save you money on interest, large overpayments to reduce the term can save you much more in the long run.

As for going to lenders, it will always be an option but of course with an early repayment charge, which on a long-term fix like that could be very hefty.

ey_up

Thanks for the replies and sorry for taking a while to get back to review them! I am not concerned with clearing the debt early as with rates somewhere to where I consider historically low I would probably retain the amounts I could over pay. This I would use to split between savings, investments and maintaining a good lifestyle. More so when rates start to rise on savings again the margin would be minimal and I think I am prepared to live with that for the flexibility of having cash to play with.

My main concern centres around future moves which would be extremely likely. Someone has kindly answered my main fear in that effectively I would be locked in to the same provider for any future additional finance I may require. This is what I was expecting as I wouldnt imagine the banks would want to share security over a house.

It's all a gamble anyway isnt it ;-)