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2 or 5 year fixed rate on additional part of mortgage?
Don_Cornetto
Posts: 4 Newbie
I still have 10 months left of my existing mortgage (approx 80k at around 5.8%) and will be moving it across to a new house - leaves me needing to take an extra approx 60k to top up the funds I need to buy.
I'm torn between fixing for 5 years (at 5.05%), *or* taking a 2 year fixed (at 3.75%).
5 year fix gives stability - but only on part of the overall mortgage. It means I'd need to renegotiate the other portion next summer and would end up paying 2 sets of fees etc for as long as I was working with 2 separate products. I'd also be in a fairly weak position regarding looking at moving lenders as I'd likely always have at least one redemption fee outstanding (plus I'd not be able to try and get them to waive the arrangement fees since they'd know I couldn't easily up and leave).
2 year fix would be cheaper in the short term and would allow me to look at fixing the entire mortgage on a single rate 'sooner' (summer 2011) - but it involves lapsing onto the lenders SVR on part of the mortgage for about 12 months, and also taking the gamble on rates not being *too* much higher by summer 2011 - though they will inevitably have gone up.
Current temptation is to go with the 2 year - at 50 quid cheaper a month, I would overpay by at least that across the 2 years to soften the impact of the probable higher interest rate when I consolidate the two.
But... I (fortunately) don't do this often enough to fully understand all of the pros, cons and pitfalls! Advice welcome?!
I'm torn between fixing for 5 years (at 5.05%), *or* taking a 2 year fixed (at 3.75%).
5 year fix gives stability - but only on part of the overall mortgage. It means I'd need to renegotiate the other portion next summer and would end up paying 2 sets of fees etc for as long as I was working with 2 separate products. I'd also be in a fairly weak position regarding looking at moving lenders as I'd likely always have at least one redemption fee outstanding (plus I'd not be able to try and get them to waive the arrangement fees since they'd know I couldn't easily up and leave).
2 year fix would be cheaper in the short term and would allow me to look at fixing the entire mortgage on a single rate 'sooner' (summer 2011) - but it involves lapsing onto the lenders SVR on part of the mortgage for about 12 months, and also taking the gamble on rates not being *too* much higher by summer 2011 - though they will inevitably have gone up.
Current temptation is to go with the 2 year - at 50 quid cheaper a month, I would overpay by at least that across the 2 years to soften the impact of the probable higher interest rate when I consolidate the two.
But... I (fortunately) don't do this often enough to fully understand all of the pros, cons and pitfalls! Advice welcome?!
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