First Direct 2yr Tracker - Unltd Overpayments!?

TallicadaZ_2

Hi all,

Just have a couple of general queries regarding a First Direct mortgage we are looking into.

My girlfriend and I have been saving for a wee while now and have amassed a healthy-enough deposit for a first time purchase.

We're looking at a £131k property (in Scotland) with a £24k deposit so an 82% LTV. We really fancy First Directs '2yr Tracker Limited Edition Fee Free' which is currently tracking +2.99% over the BoE base-rate. This seems to be the best tracker rate around just now.

We are both in a good position job-wise with £50k joint income (£60k if you include my OTE - which has actually been more like £70k over the last two years) so the plan is to overpay a large amount into the mortgage whilst we have the opportunity to do so (FD offer unlimited overpayments and one-off payments!) this would also suit me for any over target earnings.

My main queries would be is this the right approach? People have commented that we should take a shorter term mortgage than 25yrs if we are financially stable enough to do so. I disagree as I would like all outgoings to be manageable on one wage, should the worst happen.
Also any obvious dangers on overpaying? The KFI doc states...

Unlimited lump sum repayments without charge - Yes
Unlimited overpayments without charge - Yes
Early Repayment Charges - No
Closure fee - No

Seems a little bit 'too good to be true' :-S

This is obviously a big (and daunting) step for us, we're only 27 & 25 and very inexperienced in this field. So any advice would be greatly appreciated.

Thanks very much!

DannyboyMidlands

Why not go for the lifetime tracker?

I recently got one of these. The only drawback is what happens if base rate rises? From my point of view I reckon it'll be years before that happens and I hope to have the whole thing paid off by then. If I'm wrong, I have extra savings I could chuck in to reduce the balance.

I thought it was better to pay some fees up front (only a few hundred quid at the time) and take the slightly lower rate on offer.

The problem with over-paying is that you can't have it back if you need it. I'm saving my over-payments elsewhere at a better interest rate.

pinkteapot

Agree with the above that if you can get a lifetime tracker instead of a 2 year at the same rate, then go for the lifetime.

I think you're taking a good approach. Since OPs are unlimited, it makes sense to keep the term longer 'just in case', and make big OPs whenever you can. We took out an HSBC lifetime tracker 18 months ago and have paid a third of the mortgage off thanks to their lovely unlimited OPs.

The First Direct sounds unusual in that it offers unlimited overpayments during the 'special rate' period (i.e. the initial 2 years). Most mortgages have limited OPs during the 2/3/5 year part at the start. But if that's confirmed by the KFI then it sounds like a good deal to me!

getmore4less

The lifetime is more expensive base + 3.29%

I think the fee free 2 year looks good, over pay and then look at the deals on the better LTV when you hit the 75% or 65% targets FD work on.

then you can also look at offsets which give a lot more flexability

TallicadaZ_2

DannyboyMidlands wrote: »

I thought it was better to pay some fees up front (only a few hundred quid at the time) and take the slightly lower rate on offer.

Yeah I know what you mean and am of the same opinion, but they don't seem to offer the same deal with fees...
Still working out cheaper overall than the majority of the deals we have compared.

Thanks for the advice everyone, much appreciated.