Seeking a mortgage that I can pay off in 4 years

ukb109

Hello,

Based on the figures below, I am looking for a mortgage that I can pay off in about 4 years. I plan to make regular monthly over-payments to achieve this goal (1500+ per month).

House value = 185k

Deposit = 115k

mortgage required = 70k


As a starting point, what would be the best type of mortgage for me?

Thanks

hcb42

a flexible one where you can make overpayments Have you tested the price comparison sites?

getmore4less

I would probably look at a low cost offset tracker over a longer term to give extra flexability and access to cash at a cheap rate in the future.

If income is OK and no credit issues

First direct have one, £99 fees,initial rate 2.79%
http://mortgages.firstdirect.com/mortgage-products/product/base-rate-tracker-offset~4


£70k @ 2.79% over 4 years initial payment £1543pm

Use that as a benchmark and see if any other deals look better

Wh05apk

You will unlikely get a "term" of 4 years as that would likely fall foul of lenders affordability, so set the term at about 10 years, and as has been suggested offset seems perfect for you, as it provides access to funds should you need them back. As you will be looking at a relatively short term, and overpaying massively then the rate is not the most important, look for low fees, and where you can transfer money in/out of the offset easily to ensure you get maximum benefit.

ukb109

Thank you for your initial views and opinions on this. I used price comparison sites recently for finding cheaper car insurance, I found the sites useful just as a starting point, but not particularly accurate. After much phoning around, I was eventually able to get my car insurance down from £620 to £400. However car insurance is something I have a reasonable understanding of, mortgages are not something I understand particularly well.

I am a bit confused by these 'offset tracker' mortgages - how are they able to offer 'access to cash at a cheap rate in the future', or 'access to funds should I need them back'?

Also it was said in one of the posts above that I should 'look for where I can transfer money in/out of the offset easily to ensure I get maximum benefit'. What does that mean and how does it work?

Are offset trackers 'interest only' mortgages, i.e. where the interest is paid off but not the capital? In the past I have been told that these type of mortgages should be avoided and the best type of mortgage are where both the interest and capital are paid off.

What determines if a particular offset tracker mortgage is 'low cost'? I assume there are a large number of different offset tracker products on the market, what determines which one is the best/cheapest.

I work in the public sector and though my job is not at risk currently, I am aware that could change in the next year or 2 (or 3 or 4). That is main reason why I would want to get mortgage paid off in as short a time as possible (i.e. while I still have job!). Even if I was made redundant, I should still be entitled to a reasonably large redundancy payment, which could go towards either completely or partially paying off any remaining mortgage.

I would like to have a meeting with a mortgage broker in my own local area but they seem rarer than hen's teeth in my area, hence why I thought it would be useful to enquire here initially. Also note the figures I provided in my initial post are not definite figures as I haven't actually decided on what to buy yet, the figures were just intended to give some indication as to my requirements (I am viewing a likely property tomorrow at that price). However my ultimate aim will be to get whatever mortgage I do get paid off in 4 years (or less) by making regular monthly overpayments (I have been saving the equivalent amount for a number of years now).

Wh05apk

I am a bit confused by these 'offset tracker' mortgages - how are they able to offer 'access to cash at a cheap rate in the future', or 'access to funds should I need them back'?

Also it was said in one of the posts above that I should 'look for where I can transfer money in/out of the offset easily to ensure I get maximum benefit'. What does that mean and how does it work?

Think of your mortgage as an overdraft of say £100,000, and you are paying 3%, if you repay £50,000, or even put into an account running alongside the mortgage, so your net balance will only be £50,000, they will therefore only charge you interest on £50,000, normally you can either re-draw, or withdraw your savings at the same rate, so you could "borrow" money for a car or whatever at the current rate (3% in this case) The reference to be easy to use, was that if the lender only accepts overpayments by post, and takes 3 weeks to return funds, then likely you will not use, and get the maximum benefit, whereas if you bank with the lender already, and can transfer in/out easily on line, then you will likely use far more.

Are offset trackers 'interest only' mortgages, i.e. where the interest is paid off but not the capital? In the past I have been told that these type of mortgages should be avoided and the best type of mortgage are where both the interest and capital are paid off.

What determines if a particular offset tracker mortgage is 'low cost'? I assume there are a large number of different offset tracker products on the market, what determines which one is the best/cheapest.

They can be interest only or repyment. you/your broker will need to work out which is best based on likely overpayments etc.

I would like to have a meeting with a mortgage broker in my own local area but they seem rarer than hen's teeth in my area, hence why I thought it would be useful to enquire here initially

Wow, where are are you ? sounds like I should move there as there would be no competition! Seriously I am sure there are loads where you are, google/speak to friends/colleagues etc for recommendations.

getmore4less

ukb109 wrote: »

Thank you for your initial views and opinions on this. I used price comparison sites recently for finding cheaper car insurance, I found the sites useful just as a starting point, but not particularly accurate. After much phoning around, I was eventually able to get my car insurance down from £620 to £400. However car insurance is something I have a reasonable understanding of, mortgages are not something I understand particularly well.

I am a bit confused by these 'offset tracker' mortgages - how are they able to offer 'access to cash at a cheap rate in the future', or 'access to funds should I need them back'?

Starting with the offset concept. with these rather than paying of the mortgage you run account along side which you deposit money and this offsets the debt, you pay interest on the net position, they can be interest only or repayment.


Rather than get a 4 year mortgage and pay it off quickly you get say a 10year mortgage and full up the offset account in 4 years, this then costs you nothing(100% offset) in interest from then on but you can always borrow the money back and start paying interest again at the mortgage rate which is usualy the cheaperst you can get money.

Also it was said in one of the posts above that I should 'look for where I can transfer money in/out of the offset easily to ensure I get maximum benefit'. What does that mean and how does it work?

Some times the mortgage rate may be below the savings rates so you want to be able to get the money in/out quickly, my offset rate is 1.45%, savings are net 2%+ so ihave my money in savings accounts if the rates change I can move it all back

Are offset trackers 'interest only' mortgages, i.e. where the interest is paid off but not the capital? In the past I have been told that these type of mortgages should be avoided and the best type of mortgage are where both the interest and capital are paid off.

as above you choose but as long as the net position is heading towards zero you are able to pay off the mortgage when you want.

What determines if a particular offset tracker mortgage is 'low cost'? I assume there are a large number of different offset tracker products on the market, what determines which one is the best/cheapest.

Low cost is a combination of fees and rates.

I work in the public sector and though my job is not at risk currently, I am aware that could change in the next year or 2 (or 3 or 4). That is main reason why I would want to get mortgage paid off in as short a time as possible (i.e. while I still have job!). Even if I was made redundant, I should still be entitled to a reasonably large redundancy payment, which could go towards either completely or partially paying off any remaining mortgage.

A good reason to get over a longer term more fleaxbility should income dry up.
The offset is also good here because you offset the redundancy payment to reduce costs but can access the money if you need it.

I would like to have a meeting with a mortgage broker in my own local area but they seem rarer than hen's teeth in my area, hence why I thought it would be useful to enquire here initially. Also note the figures I provided in my initial post are not definite figures as I haven't actually decided on what to buy yet, the figures were just intended to give some indication as to my requirements (I am viewing a likely property tomorrow at that price). However my ultimate aim will be to get whatever mortgage I do get paid off in 4 years (or less) by making regular monthly overpayments (I have been saving the equivalent amount for a number of years now).

Since you clearly have significant surplus income, I would look at the mortgage as part of the bigger picture and consider you savings and investment plans especialy ISA allowances and pension provisions.

Moertgage free is part of retirement planning, I would seriously consider using the ISA allowances, which are use or lose and have a tax benifit well beyond the mortgage period, paying the mortgage over a longer period is not that much of an issue it is the net position that matters.

If some of your savings are allready in ISA's you could get a bigger mortgage and keep the cuurent ones.

Another option might be Barclays you can offset cash ISA with them.

ukb109

ok thanks.