First time buyer advice needed!

danny101369

High all.

With an 80% LTV mortgage fixed for 5 years, I can get a rate of just under 4%. As this is my first mortgage I was hoping I could get answers to a few questions i'm struggling to find answers for.

1. I assume that at the end of the initial fixed period, one is free to shop around for another fixed deal or maybe just a cheaper variable rate than the current provider i'm with?
2. If the above is true, are there charges for moving provider at the end of the fixed term?
3. When looking at the rates, there are figures given for initial rate and overall APR. As I will look to secure another fixed period at the end of the initial one, am I right to discard all rates apart from the initial fixed figure as they will be irrelevant to me.

Thanks in advance for any advice, Danny

englandcrew

danny101369 wrote: »

High all.

With an 80% LTV mortgage fixed for 5 years, I can get a rate of just under 4%. As this is my first mortgage I was hoping I could get answers to a few questions i'm struggling to find answers for.

1. I assume that at the end of the initial fixed period, one is free to shop around for another fixed deal or maybe just a cheaper variable rate than the current provider i'm with?
2. If the above is true, are there charges for moving provider at the end of the fixed term?
3. When looking at the rates, there are figures given for initial rate and overall APR. As I will look to secure another fixed period at the end of the initial one, am I right to discard all rates apart from the initial fixed figure as they will be irrelevant to me.

Thanks in advance for any advice, Danny

Hi, I am a FTB as well but I have been asking questions/browsing this forum for a long time.

1) Yes, when you are nearing the end of your rate if you are not happy with the rate you will be moving onto then look around and secure a deal you are happy with.

2) Alot of lenders do have charges whenever you decide to leave. I have applied with N&P and whenever I do leave I have to pay £160.

3) Yes i would ignore the APR. If you will secure another deal when this one expires then you will be given another APR rate which is a rough guide.

Hope that helps

danny101369

Thanks for the quick response. Two other questions I forgot to ask earlier:

1. How much capital will roughly do you pay off in the first five years/10 years of the mortgage? I understand it's a very complex calculation with the top heavy structure of interest payments, but just wanted a rough figure.
2. If I buy a new house in say 10 years time (hopefully using the equity gained in this one to get a bigger down payment), do you take the current mortgage with you (IE only having 15 years left on it), or do you take out a brand new mortgage every time you buy a new property?

Again thanks for the responses, Danny

bigadaj

I haven't gone through the figures but mortgage payments reduce capital very slowly, you will have paid off less than 5%in the first five years on many deals, conversely you would pay off something like 30% or moe in the last five years. The consequence is that even though mortgage rates are low, you can end up paying between 3 and 5 times the amount you borrowed over 25 years.

If you moved you would either port your current mortgage, and negotiate an additional advance with the lender or potentially get a totally new mortgage with another provider, this would be controlled by rates and costs and who would offer you a good deal.

The point you make about the mortgage term is a good one and something many people ignore. In theory you should take the new mortgage over a shorter term to ensure that you pay it off before retirement, however many people take it over longer periods to reduce payments, which is why so many people are now hitting retirement with outstanding mortgages.