FTB Mortgage - Fixed for how long?

tomaszrykala

Hi all, I'm new to this forum and to mortgages. I just need a bit of advice please.

My wife and I have put a holding deposit down for a Newbuy property and been offered a 95% LTV Santander mortgage fixed at 5.49% for 3-5 yrs. We thought that was very good and were happy to progress only to discover a day later a Natwest offer at 4.79% fixed for 5 yrs. However, we can't proceed with the Natwest one as my wife is on a probationary period for the next two months, gah!

Well, to make ourselves feel better, we are considering staying with Santander fixed rate for 3 yrs, hoping that after the 3 yrs, the rate will indeed drop to the estimated 4.24% and we will recuperate some money from the missed Natwest one. So the question is, is this a good idea?

Do you think we should risk it and go for 3 yrs, or go for 5 and forget about the missed Natwest deal altogether. We heard from some friends that our gamble should be worth taking, while others doubt that the rates will go down, in fact, they could be going up.

Just to be clear: We don't feel like actually putting the flat back on the market and waiting two months for Natwest, as the flat could be sold in the meantime. Yes, we really like it.

bigadaj

Rates are only going to go up in the longer term, no sign currently but it must happen in the next few years, it would therefore make sense to fix for a longer term assuming you dont plan on moving or changing circumstances in that time.

originalmiscellany

If you are taking out a high LTV, then 95% is going to be a real challenge in getting a decent mortgage, therefore take what you can!

There are 2 strategies - either take a short term mortgage, say for 2 years and try to overpay as much as you can (Do you think that you will be able to overpay much? We're looking at getting you down to 80% for this to work)

The alternative is to fix for as long as you can and don't get worried by people telling you "Oh I'm paying 0.09% on my mortgage" but just settle down confident you know exactly how much you are paying and if you can save money, then even better!

tomaszrykala

That's very helpful. Thank you both.

I'm going to calculate our finances and see by how much we should be able to overpay our mortgage. We are allowed 10% overpayments. If we can't match that, we'll just fix the rate for 5 yrs.

dimbo61

What you need to do is build up equity in the property!
Now do you need to pay back 10% to the builder after say 5 years?
Some newbuild deals require you to do this OR pay interest.
If you take the 5 years fix it gives you longer to build up equity and if you can to also overpay even £50 a month is £600 a year and £3000 over 5 years PLUS the interest saved ( TAX FREE)

tomaszrykala

Hi all, Santander has just dropped the rate of the three year fix to 4.99 and five year to 5.29 . These are repayment mortgage options. We are now trying to decide whether we should go for 5.29 for 5 yrs and pay normally or 4.99 for three yrs and overpay a bit every month (we're allowed 10% overpayment). Which one of the two is a better way to build up equity in the property? Thank you.

Zero_Sum

tomaszrykala wrote: »

Hi all, I'm new to this forum and to mortgages. I just need a bit of advice please.

My wife and I have put a holding deposit down for a Newbuy property and been offered a 95% LTV Santander mortgage fixed at 5.49% for 3-5 yrs. We thought that was very good and were happy to progress only to discover a day later a Natwest offer at 4.79% fixed for 5 yrs. However, we can't proceed with the Natwest one as my wife is on a probationary period for the next two months, gah!

Well, to make ourselves feel better, we are considering staying with Santander fixed rate for 3 yrs, hoping that after the 3 yrs, the rate will indeed drop to the estimated 4.24% and we will recuperate some money from the missed Natwest one. So the question is, is this a good idea?

Do you think we should risk it and go for 3 yrs, or go for 5 and forget about the missed Natwest deal altogether. We heard from some friends that our gamble should be worth taking, while others doubt that the rates will go down, in fact, they could be going up.

Just to be clear: We don't feel like actually putting the flat back on the market and waiting two months for Natwest, as the flat could be sold in the meantime. Yes, we really like it.

have you factored in any fees against the value of the mortgage with the difference in interest rates?

As sometimes your better off with the higher rate

tomaszrykala

Zero_Sum wrote: »

have you factored in any fees against the value of the mortgage with the difference in interest rates?

As sometimes your better off with the higher rate

Hmm, good point. Both mortgages are free, so there is no cost difference at the moment.

Actually, I think we have already decided. Thank you for your input.

dimbo61

Sit down with your wife and take a long hard look at where you plan to be in 3/5 years time?
You are married, kids planned or on the way, will you move jobs/areas every 2/3 years ? Is the property you want to buy big enough for you and the KIDS?
Buying a property is very expensive and I doubt you will be able to overpay by 10% a year or anywhere near that if you only have a 5% deposit now.
Have you got everything you need for the new property ? Been paying bills in a rented place for 2/3 years so you are aware of all the costs!
A mortgage is a long term commitment 25/30 years so think long term as you will have a much better LTV if you take a longer term.
Only my views after long and bitter experience

tomaszrykala

dimbo61 wrote: »

Sit down with your wife and take a long hard look at where you plan to be in 3/5 years time?
You are married, kids planned or on the way, will you move jobs/areas every 2/3 years ? Is the property you want to buy big enough for you and the KIDS?
Buying a property is very expensive and I doubt you will be able to overpay by 10% a year or anywhere near that if you only have a 5% deposit now.
Have you got everything you need for the new property ? Been paying bills in a rented place for 2/3 years so you are aware of all the costs!
A mortgage is a long term commitment 25/30 years so think long term as you will have a much better LTV if you take a longer term.
Only my views after long and bitter experience

We don't play on any kids for a few years, but who knows what will happen. We are married already, so that cost is out of the way. You have given us some good life-earned advice here, thank you. We will consider.