mortgage rates- cheapest pcm or best rate?

bendyke

Evening all

we're first time buyers and we've just had an offer accepted on a house, which we're chuffed about. I've read a fair bit on the net and looking at going for a 2-3yr fixed deal. I've got various affordable mortgages through but would like some help on a couple of things

Is it best to go for the cheapest over the 2-3 year period or is it better to pay more and pay off more of the property (i take it if the rate is lower, you would pay off more?!)

also, what impact does the rate after the initial rate have i.e. should you really consider that if you're going to look elsewhere at the end of the 2-3 year term?

thanks

GMS

Many things to consider. The cheapest rate is not always the best mortgage. Sounds silly to say but there are reasons why. A cheap rate may have a large arrangement fee. Often the saving per month is less than the arrangement fee so over the term of the fixed rate you will not claw it back. Same with the cheapest monthly payment. Could be the cheapest mortgage but have a £2000 arrangement fee. After a 2 year fixed the balance may only be reduced by the fee, not the capital.

Sit down with a broker and got hrough all options. It could be that a slightly higher rate is the better overall, for instance it may have a small or no arrangemnt fee.

Work out your budget and see how best to fit it in. If you can afford more then look to overpay if you can but be sure that you do not incur ERC's.

Without knowing your circumstances it is impossible to say but do not assume the lowest monthly payment is the best. It could be, but not necessarily.

Gorgeous_George

I have a spreadsheet that might help you decide. If you'd like to see it I can pm you the link.

GG

bendyke

Thanks for the advice, much appreciated. That spreadsheet would be great George. Thanks

sammyjammy

You should still consider the follow on rate after the fix/tracker finishes, you don't know whether you would be in a position to take out a new mortgage at that tiem, either your financial circumstances could have changed or you could be in negative equity, a particular issue int he current climate.

getmore4less

bendyke wrote: »

Evening all

we're first time buyers and we've just had an offer accepted on a house, which we're chuffed about. I've read a fair bit on the net and looking at going for a 2-3yr fixed deal. I've got various affordable mortgages through but would like some help on a couple of things

How do the rates/fees on these compare against the best trackers short term fixes do not protect you from rate rises for long.

Is it best to go for the cheapest over the 2-3 year period or is it better to pay more and pay off more of the property (i take it if the rate is lower, you would pay off more?!)

If you doo a like for like on each then usualy the cheapest over the promotional period all is the best deal BUT(see below)

also, what impact does the rate after the initial rate have i.e. should you really consider that if you're going to look elsewhere at the end of the 2-3 year term?

thanks

The followon rate can be critical,you want one that is shown to be competative either a lender with a consitantly good SVR or a tracker rate that is good.

There is the risk that lending criteria, affordability(income drops) or LTV(values drop) make a remortgage at the end of the promotion an issue.

northern_at_heart

Hi George, sorry to hijack the thread but would you mind sending me the link to your spreadsheet too please? I would find this helpful too!
Thanks,
Northern