Mortgage Advice For A Newbie

shaz77_2

Hi

I am a first time buyer hoping to purchase a property for £123k, I am putting down a deposit of £61K and I will require a mortgage of £62K. I earn approximately £20,000 p/a.

I have earmarked two potential mortgages and I was hoping to get some advice as to what is the better option:

1. Mortgage 1 - Base rate tracker mortgage of 3.09%, arrangement fee equates to £499 and the mortgage also pay £200 towards solicitors fees and £170 towards a valuation report. The mortgage allows unlimited overpayments.

Over 15 years subject to the rate not changing the monthly repayments will be £430.61.

2. Mortgage 2 - Fixed rate two year mortgage of 3.99%, arrangement fee equates to £874.64 which includes a conveyance fee and the mortgage allows overpayments once a year of not more than 10% of the amount outstanding.

Monthly repayments over 15 years would be £550.

Thanks in advance.

Mrs_Bumble

With the base rate tracker can you afford the monthly repayments if the bank of england base rate did start to climb? How would this impact on your monthly budget? Additionally the BOEBR would only need to increase by 0.9% to make you at 4.00%?

Does a fixed rate for 2 years give you security and peace of mind knowing that you can budget for the monthly payments?

For both of your options you have said that the monthly payments will be XYZ for the 15 years which I assume is your mortgage term, but you can only know what the monthly payments will be for the term of the product that you take out, so that won't be the monthly payments for 15 years as the interest rate will change at the end of the term of the product.

What are your plans in 2 years? Will you be looking to move? Or will it be a case of having to remortgage again then and paying further fees?

The answers to your questions are really about your household budget, circumstances, and attitude to risk.

jizba

With mortgage one you have saved almost £600, that would almost immediately wipe out any fears of a interest rise, on top of that you will save a fair bit from the lower monthly payments so I believe over two years mortgage 1 is the safer option especially if you can afford the overpayments.

jizba

Mrs_Bumble wrote: »

Additionally the BOEBR would only need to increase by 0.5% to make you at 4.00%?

It would take a rise of 0.9% to bring it level with the fixed rate account.

Mrs_Bumble

oops!! that will teach me to multi task! read the tracker as +3.59! sorry!

jizba

Mrs_Bumble wrote: »

oops!! that will teach me to multi task! read the tracker as +3.59! sorry!

To be honest I had reservations posting it as I thought you may know something I don't.

Mrs_Bumble

jizba wrote: »

To be honest I had reservations posting it as I thought you may know something I don't.

I do! don't have 4 kids because they still drive you nuts even when they are grown up! You come into the living room for a bit of peace and quiet and they follow you! Asking you questions and arguing with you!

jizba

Mrs_Bumble wrote: »

I do! don't have 4 kids because they still drive you nuts even when they are grown up! You come into the living room for a bit of peace and quiet and they follow you! Asking you questions and arguing with you!

I do sympathise with you.

What do you feel regarding my points in post three regarding mortgage one being the better mortgage? I'm asking as I am in a similar position to the OP.

Mrs_Bumble

It really does depend on your own personal budget and circumstances as I posted above, attitude to risk and what your plans are for the future, as the answers will be different for different people because some have more disposable income each month than others.

shaz77_2

Thanks guys.

Is there a calculator available where I could work out how overpayments would affect my total mortgage?

Mrs_Bumble

I quite like this one as I think it is easy to read.

http://whatmortgage.co.uk/calculators/fleximortgage.html