2 year or 5 year fixed rate?

brettarider

Morning all:D,
I've been offered a mortgage in principle with HSBC as I can only afford to put down a 10% deposit I'm limited to the APR available to me is 5.99% on a 2 year fixed rate until Oct 2011 or 6.25% until Oct 2014 then they drop down to their standard variable rates.

Not sure what I will be doing with regards to the place I'm hoping to buy i.e. selling it in a few years etc.

Any sort of advice would be good cheers

dwsjarcmcd

brettarider wrote: »

Not sure what I will be doing with regards to the place I'm hoping to buy i.e. selling it in a few years etc.

In which case the 2 year deal may be better. That said, there are a number of factors which you need to consider.
- Presumibly you will be buying somewhere else when you sell. You could opt for the 5 year deal and port it to the new property.
- Can you afford to pay a higher (than 6.25%) interest rate, which may be the case in 2 years?
- What do you think will happen to property prices. If they fall over the next 2 years you may find yourself in negative equity.
- What are your salary prospects over the 2 / 5 year period.

These are questions you need to consider from your personal perspective

Good luck, David

opinions4u

If you're planning to sell within 5 years, then you need to decide if a 5 year fix with early repayment charges is the right thing.

If you're in it for the longer term then I'd go with the longer fix.

Are there any tracker options you'd be willing to consider? A lower rate tracker over a shorter period might be better for the circumstances the limited information you've provided suggests.

Take a look at www.moneyfacts.co.uk and weigh up a wider range of options.

brettarider

I dont really fancy a tracker TBH and been advised against them. Salary wise not sure no pay rises this year however there should be one next year and company is looking at other firms in the UK in a similar line of work to aline salaries etc. As I'm on the lower rung pay wise of my job and the fact that our dept does the same amount of work as 4 depts for a competitor I'd expect some sort of rise 1-2k maybe. However I will also have the dreaded CSA payments go up then as well:mad:

Mrs_Bumble

From what you have said then it sounds like a fixed gives you monthly stability and a budget.

So whether you take a 2 year or 5 year really depends on what your plans are for the property in that time?

If you see yourself keeping hold of the property for 5 years or more then is there in practical reason to remortgage and incur further costs in a couple of years time?

But if you see yourself selling in this period of time then is there any point of tying yourself into the ERC or the lender?

Comes down to what your plans are for the property really?

brettarider

Yeah not sure really might like living in the town center might not just dont know what the future holds never thought I'd be divorced and selling up my last place a few years ago:rolleyes: Mind you as long as it's ok and the mortgage is affordable that'll do me had the same rule on my last place I dont need to keep up with the jones' or live in a palace

ChuiMartinez

Guess it also depends on how much equity you think you can build within 2 years.

If you thinnk you can build enough to get from 10% to 25% equity and assuming property prices don't fall (they are showing signs of stabilising but its difficult to establish where they will go) then you will be able to remortgage in two years on a better rate.

Again big assumptions behind this is rates don't go through the roof within 2 years.

Personally i was all set to go for a 5 year fix but i think i'm going to change to 2 years. But this is because of my personal circumstances.