First time buyer mortgage issues

stavross_2

This is the mortgage we have been offered

2year fixed rate at 4.89
product fee £990
valuation fee 355

we are mortgaging 136000 over 25 yrs with payments of £790


My concerns are that we can handle this payment but after the 2 years have expired what if interest rates are much higher?

Does this seem a good mortgage deal for first time buyers?

blueberrypie

What percentage of your purchase-price are you borrowing? My concern would be that after two years your options would be limited due to very low or negative equity. If you think you'd have trouble paying much more than £790/month, it might be worth looking for a longer fix.

Thrugelmir

Why pay a £990 fee for a 2 year fix?

If you wish to fix , go longer.

Product fees enable lenders and brokers alike to earn money. Churning is what the investment industry calls it.

brit1234

Thrugelmir wrote: »

Why pay a £990 fee for a 2 year fix?

If you wish to fix , go longer.

Product fees enable lenders and brokers alike to earn money. Churning is what the investment industry calls it.

I agree, a 5 year fix would be better. Little benefit with a 2 year fix, your just getting raped more by the lender in fees on a more frequent basis.

Again 2 years time you may be in negative equity with the price falls.

Seems that you will struggle with any changes so it might be worth you saving a little more and enjoying the price falls. It will put you in a far more secure position

stavross_2

Thanks for your reply's

We need to buy now, just had enough of landlords and want a place of our own, it also has lots of work needed so feel we can make it a nice place that wont loose money.

I was told that interest rates are unlikely to change much in 2 years so after 2 years i will have much more options of getting a better mortgage?

I was also told that the longer i fix the mortgage for the higher the interest rate for paying back will be

Am unsure now wheter having longer fix or higher percentage is best?

The LTV we have is 84%.....because of the work needed doing on the house dont think we can put much more into deposit

CloudCuckooLand

If you pay £990 every two years for the life of a 25 year mortgage, that's £12k...

It equates to approx 0.5% on your rate, per £100k.

If you agree with the comments given to you that rates will stay benign, find a fee free tracker. Keep the £990 ready to jump onto a Fixed deal at the first sign of base rates increasing.

Of course, the truth is that whoever said rates will stay low for 2 years is a salesman not a clairvoyant.

A touch higher rate for 2 or 3 extra years, will cost more per month, but avoids the risk that at the 2 year mark, rates have shot up and you are unable to afford it. It also allows a few more pay rises to (hopefully) improve your general financial position.

blueberrypie

stavross wrote: »

Thanks for your reply's

We need to buy now, just had enough of landlords and want a place of our own, it also has lots of work needed so feel we can make it a nice place that wont loose money.

I was told that interest rates are unlikely to change much in 2 years so after 2 years i will have much more options of getting a better mortgage?

Are you thinking that you'd have to borrow less because you'd have some equity in the house? If so, you should realise that mortgage payments in the first few years are made up largely of interest, so your mortgage balance doesn't change a lot. With the figures you've provided, after two years you'll still owe about £130k. Unless the value of your property goes up a lot in those two years, you won't really be in any better a position for getting a new mortgage. If your property value goes down, you could well find yourself with so little equity that you can't remortgage at all - or in negative equity, which has the same result (i.e. you can't move and you can't remortgage).