Abbey 2 or 3yr fix?

Gareth83

I'm a FTB with a 85% LTV

I am going to go for the Abbey over a 35yr term but not sure whether to choose the 2yr or 3yr fix.

The rates for both are 5.84% which isn't bad for a FTB, monthly repayments are £471.62 on a £98,000 (£14,700 deposit) house which suit us fine.

But should we go for a 2yr fix or 3yr?

Also for the early repayment charge:

Early Repayment Charge 3% of outstanding loan+ cashback repayable before 02/03/2011, 3% of outstanding loan for scheme period

Does that mean there is a 3% charge for the whole 35yr term??

herbiesjp

Gareth83 wrote: »

Does that mean there is a 3% charge for the whole 35yr term??

No - only until 02/03/2011

Gareth83

So a pretty standard charge then.

What you reckon on 2 or 3yr fix?

dimbo61

If you are borrowing £83,300 over 35 years at 5.84% you will have
£81,759 outstanding after 2 years
£80,919 outstanding after 3 years
In other words you will have paid very little off the mortgage in the first 2 or 3 years.
who knows what the interest rate will be in 2/3 years time but if you are allowed to overpay ( check with lender ) and can afford to overpay you can reduce your debt anhd you have security for next 2/3 years.
Do you plan on moving ? Is your job safe ? is the property big enough ?

Gareth83

dimbo61 wrote: »

If you are borrowing £83,300 over 35 years at 5.84% you will have
£81,759 outstanding after 2 years
£80,919 outstanding after 3 years

How did you calculate this?

In other words you will have paid very little off the mortgage in the first 2 or 3 years.
who knows what the interest rate will be in 2/3 years time but if you are allowed to overpay ( check with lender ) and can afford to overpay you can reduce your debt anhd you have security for next 2/3 years.
Do you plan on moving ? Is your job safe ? is the property big enough ?

I understand I would have paid off very little in the first 2 or 3yrs, If I went for the 25yr option the repayments would go up and I wouldn't pay much off extra either. My broker has said if I can afford to just set some money aside at least that way I wont struggle to make any payments.

I can then switch mortgage in 2yrs.

Would it be better to overpay when able or just set aside?

Can one switch to 25yr term during the mortgage?

System

I'd wait a couple of weeks, Abbey are long overdue a review of their rates, and haven't applied the -.45% cut yet.

dimbo61

"whatsthecost" website
Have they got any 5 year deals which give you longer term security and the chance to reduce your debt and build up the equity in the property and hence get a better deal next time ( better LTV ! )
Lots of people on here coming out of 2 year deals with little equity or even negative equity and stuck on lenders SVR

dimbo61

If your broker wants you to set some money aside will he/she tell you how you can get 5.84% after tax on savings ( overpay much better !)
You can change the term to 15/20/25 years costs about £25/50 for paperwork.