2 Year Term Mortgages??

koexelek

betmunch wrote: »

No, the ERC is generally for the product period, in your example it would be 2 years to match the 2 year fix, even if you had a 5 year term to get more lenders interested.

Correct.

Few lenders will want to set up a mortgage for less than a 5 year term, but they are happy for you to pay it off earlier.
Best to do it after the ERP has run out on the product though

blueberrypie

balmufc wrote: »

Fair point but getting a 2 year fixed mortage over a 2 year term would mean changes in interest rates wouldn't affect us. Also the main incentive for us is to be mortgage free asap based on our finances so getting a 5 year term is not as attractive to us.

I think you're not quite clear on what the different words mean. The "term" of a mortgage is simply how long it would take you to pay it off if you never made any over-payments. ERCs only apply during the bit at the beginning of a mortgage when you're tied in - usually between one and five years.

So you could (for example) have a mortgage with a 30-year term and a one-year fix at 4%. You'd pay 4% interest for the first year, then you'd go onto whatever the follow-on rate specified in the mortgage was (often SVR or a tracker rate) - but after that first year you'd be free to pay off as much as you wanted and ERCs wouldn't apply.

What you want to do is pay off your mortgage within the next two years. You could do this by taking a mortgage with a two-year term, but there aren't many of those about so you're limiting your options. Or you could do it by taking out a mortgage with a 5-year term (or a 25-year term - it doesn't matter if you're going to be overpaying anyway!) and a one-year or two-year fix, with no charges for overpaying, and pay it off within the two years anyway.

Or you could look for the lowest possible interest rate that came with no ERC after two years, then pay the standard monthly payments on that mortgage and put your extra funds into a savings product making more interest than your mortgage is charging. For example if you had a 3% mortgage rate and you could earn 4% (after tax) on savings, you'd be better off to save the money for the two years and then pay off the mortgage at the end of the two years.

As you've probably realised, there are lots of ways of doing what you want to do, so it would probably be worth a chat with an independent mortgage advisor, who will know what products do what you want them to do, what products you're eligible for (e.g. if your LTV is over 65%, you won't get that FD 2.99%) and which lenders are most likely to work with you (e.g. FD is, I believe, known for being quite fussy about credit ratings - I've no idea what yours is like, that's just an example of info an independent advisor would have that might be useful).

balmufc

Thanks for yojur replies and for explaining things to me as I think I understand how things work a bit more now!

I'll do a bit more research into my additional options that I now have and take it from there.

Thanks again.