FTB: mortgages, banks and independant advisors

Enigma80

Hi all,

We've been looking around for a place to buy for about three months now and we've just finally found a place. We've been looking around at mortages, both directly with banks/building societies and with independant advisors. We've found one with Nationwide on a 2yr tracker 90% with a better interest rate than the 85%.

One of the indepdant advisors came back with Nationwide too, but with an 85% interest only mortgage. He suggested that we should also take out something called a 'Flexible Repayment Plan' where we have a special account that we pay into each month. For example, if we can afford £800 repayment and the interest only is £550 then we pay the remainder, £250, into this account. At the end of each year we have to option of paying off a lumpsum and thus decreasing our interest only payments.

The flexibility comes in when for example we need access to that money for anything, replacement white goods for instance. From what I understand, it's simply a current account that we pay into each month and we can under/over pay as we see fit.

I'm not sure what to make of it to be honest. Has anyone else come across this before? The advisor keeps calling back for a decision and to honest I don't like the pushy approach. My family are a bit weary about it and have advised against it.

I think I might go for the 90% tracker as it's comes with a lower interest rate as a special offer, although I'd need to have my salary going into a Nationwide account though. I also have a question about this if anyone can advice. My wife and I both like the Bank we're with now and ideally don't want to move. However, we have been advised that we need the salary going into the account at first and then go back to our preferred Banks. Is this a major issue, or would we be penalised for doing this?

Any advice appreciated.

Thanks.

Joe_Bloggs

The Nationwide allow up to £500 a month overpayment per mortgage which will have a near instant effect on the amount of interest charged.

What interest would you pay on this mortgage ? What interest would you get on your suspended overpayments ? If any interest was paid on these overpayments in limbo then what is the taxation situation of the interest?
J_B.

nollag2006

Hi Enigma

you need to clarify with the broker whether this is an offset mortgage or not. If it is, then it sounds like a good deal. If it is not, then there may be tax issues involved.

As for opening and shutting the bank account - its a bit of hassle for a marginally better rate, and will have an impact on your credit score. Why not stay with the N'wide for a while? They get a good press on here.

All things considered, if the rates are reasonably similar then the 90% Nationwide tracker might be better.

Enigma80

Yeah there's a difference around 2% with the 85% fixed rate being higher than the 2yr tracker at 90% because of the 'special offer'. IIRC it makes a difference of a couple of hundred a month.

jenny_13

As joe bloggs has said Nationwide allow upto £500 p/m overpayments on their mortgages which is why I picked them. I would go for the repayment mortgage but I think that's because on an interest only mortgage I'd forget to put the extra aside.

Enigma80

Well I will most likely go for the repayment as it comes at a better rate anyway. Just wanted to know if anyone else had heard about this flexible repayment thing.