First mortgage....which one...fixed or tracker ?

[Deleted User]

I've been left 50k by family and am in the process of buying my first property.I'm applying as I write for a small mortgage to buy a flat...35k to be precise.I won't get any larger as I do not earn over 14,000 a year.One lender has said I can get 24k with them so far.I havn't a clue really what is best...a fixed rate or a tracker.I'm 50 in October so term will be 15 years probably. The flat I'm looking at is on for 89k...and I'm thinking to put in a cash offer.Any advice on which mortgage is best and how much should I offer for the flat...I was thinking 75k...hoping they'd go for it.Thanks.
Any quick responses would be much appreciated as I'm talking to my bank tomorrow.

R_P_W

Sorry you say you are putting in a cash offer but also applying for a mortgage?

If you do want a mortgage maybe see an independent mortgage broker/advisor - I wouln't just go to my bank as they will have a very limited range of what they can offer you and you won't be able to compare whether you are getting a good deal.

It seems based on your LTV % that you should have access to the better deals - whether you go for a tracker or a fix is a personal choice depending on your circumstances and attitude to risk. If a tracker rate has a lower rate than a fix then personally I would be tempted by that, a fix will generally cost you a bit more but you might want the securoity of fixed payments.

You need to get some mortgages to compare as a first step. Maybe check some comparison sites to see what might be available.

dimbo61

You are not a cash buyer if you need a mortgage to help buy a property.
Do you earn a regular income ? will your job carry on until you are 65/66/67?
Do you get paid pretty much the same each year ? with wage increase in line with inflation ? or are you due big pay rises at work each year ?
Some very good long term fixes now available which give you long term security and consider offset to build up savings while paying off the mortgage ASAP

[Deleted User]

ok, thanks for the replies...I'm self employed and earn roughly the same each year...I want the money in the bank before I make any offers.Any idea then how much to offer on an asking price of 89k.I've no chain.It's owned by a lovely old couple who are moving into a purpose built block.Their flat is very close to where my son lives with his mum...so he can pop round whenever he wants...that's the main reason for buying it...plus it's in solid condition and hardly needs anything doing to it..also I don't want to let them down in making an offer I cannot make it wouldn't be right...
.

GMS

Do you have accounts to show your income and for how many years?

Worth a chat with a broker if you have no real understanding of mortgages.

R_P_W

Hi, unless someone tells me I'm wrong.....

If you don't have the cash now to cover the purchase and require a mortgage then you won't be able to apply for a mortgage, get the money in your bank and then put in an offer?

My understanding is that you identify either on your own or through a broker what level of mortgage you could obtain and what it will cost. Then you would place an offer, if accepted you apply for a mortgage.

[Deleted User]

Ok...yes I have accounts...so anyone going to hazzard a guess on how much I should offer for the 89k flat ...the estate agent for that flat has just called to ask if I'm still interested.If I can put in an offer and THEN get a small mortgage...what do you think is a decent offer without being derogatory ? A simple straight answer would suffice...

R_P_W

It has nothing to do with being derogatory. Depends on how long it has been on the market, how quickly the sellers want/need to move, is there strong interest in the property from others.

If its just you interested at the moment offer them £70k and see what they say.

AlexMac

To answer your Q 'how much'; in today's market, no offer's derisory, and judging by the fact that the £89k asking price implies your area is one where where values are lower than the UK average, and propoerty probably moves slowly (rather than in one of the few prime areas where well-presented properties sell fast), you could get lucky with a cheeky offer...
if the selling agent can be convinced you are serious and a good prospect. Do your homework on a site like Zoopla; click on 'Current values', 'UK property values' at the top, then 'Browse property values by area nearer to bottom of the page to selct regions and see average prices and as important, trends over the past few years. Check also by postcode for actual sale prices in your postcode of choice. Armed with this info, and letting the agent know you're aware of local and regional prices, you can hopefully persuade the agent to lean on their client to lower their expectaions. Prices are falling, but vendors remember what they hope their place was worth 3 years ago (or worse, what they paid for it if they bought at the peak in mid 2007 since when, the market has dropped 20-25% in many areas - ie possibly from £90k to £68-70k!).

I did this locally last autumn and paid £152.5k a flat that had been marketed only a year before at £180k.

The other factor is to persuade the selling agent that you will easily get a mortgage, or already have an in-principle offer; which takes us back to the initial Q- fixed or tracker. You have the arguments above re 'risk or certainty' but I don't regret having gone for a low base-rate plus a % tracker about 9 years ago as in 2008 Bank of England Base interest rate tumbled to a historic low of 0.5% and I've been laughing since. I'm optimistic that base rates may go up, but will not approach their highs of around 4- 5% of the early 2000's, and certainly not the double-digit highs of the 1990's (after I bought my 1st place, base rates peaked at 14% in 1989!)

Assuming that trackers are still cheaper than fixes (I've not checked) you'd be gambling on whether the Bank of England will hike rates up by more than a percentage or so in the next 10-15 years; I think not, but what do I know? But I'd go for it if I was you

Good luck

buzi

what would cause the boe to hike up the interest rates?

AlexMac

Buzi (if you're still there)- see the BOE website: in brief- they say they'll raise interest to discourage consumer spending if we're all splashing too much cash around:- (quote)
"A reduction in interest rates makes saving less attractive and borrowing more attractive, which stimulates spending. Lower interest rates can affect consumers’ and firms’ cash-flow – a fall in interest rates reduces the income from savings and the interest payments due on loans. Borrowers tend to spend more of any extra money they have than lenders, so the net effect of lower interest rates through this cash-flow channel is to encourage higher spending in aggregate. The opposite occurs when interest rates are increased...'.

But hey- what do they know? Anyway- the message is that while we all feel skint and this gOVERNMENT keeps preaching its (arguably daft) constraint message and checking people on the dole, interst rates will stay low. Which seems counter-intuitive to me but then - hey- what do I know? (apart from the fact that my current 1.25% tracker rate's a lot less painful than my 15% 1980's one was!)