Almost at a major LTV threshhold - avoid a long fix?

jimbow25

I'm a first time buyer and therefore a complete mortgage newbie.
I have just had an offer accepted on a property for which I'm lucky to have a deposit of between 23 and 24% of the value. It won't be feasible to stretch to 25% in time for completion as this is another £4,000.

Playing with the MSE overpayment calculator using a typical interest rate and 25 year term. I noticed I will fall below 75% LTV after 1 year if the value stays the same.

I'm anticipating wanting to fix for some length of time and had been thinking of fixing for longer to get more certainty.

However, would I be silly to get a fix for say 5 years, when re-mortgaging in 2 years time would mean I'm in a better position to get a good interest rate? Will a lender be rubbing their hands as I pay 0.3% more throughout years 3, 4, and 5? (that's how much more Nationwide's 80% mortgages are vs 75%).

Or should I just get the best deal I can right now and not gamble on what products will be available in 2 years time?

I appreciate it partly down to my risk attitude and both ways could turn out better or worse I'd just be interested to know what other MSEers gut feelings would be.

Yorkie1

I can't answer your specific question, but don't forget to factor the additional expenses of remortgaging into your calculations, i.e. product fee, valuation, survey, legal costs. These can add up if you are remortgaging every couple of years.

martinsurrey

What I would do is

get something like an HSBC fee free variable rate (80% LTV).

stick with it for 6-8-10 months then remortgage onto your 25% fixed.

no double fees and rates are not going to move much (IMO) int he next 12 months.

somethingcorporate

Have you worked out how long it will take you to get down to the threshold?

The advice in post #3 is good, I would certainly consider doing something similar. Do also consider you can book a rate 6 months in advance (with some lenders) so do keep your eyes on the horizon.

getmore4less

Check the follow on rates.

£4k at 1% is a £400k house, at 2% £200k,

Why was your offer not a bit lower to make you 25%
Are you just over the £250k.

jimbow25

Thanks for the helpful posts so far.

Based on that calculator it will take 11/12 months of repayments to reach 75% LTV assuming the value is unchanged.

"Why was your offer not a bit lower to make you 25%"
Ideally that would have been the case but the price would have had to be another 17k lower for my current deposit to be a 25% deposit that wasn't feasible here (I've already got a 20k discount off the advertised price). The 1-2% difference amounts to a lot in this case. I just managed to stay within 4 1/2 times salary on the mortgage amount so a 25% deposit would've been nice but (hopefully) not the be all and end all, just something to bear in mind in a year or two's time.

If I did re-mortgage quickly as Martinsurrey suggests what are the likely costs in total of doing so? A mortgage fee of £500-1,000 (and another valuation survey? Would I need to engage a solicitor again?)

StuC75

what about if the re-valuation comes in lower at that time, resulting in you not having the 75% ltv? who's to say the property market will be picking up then?

Jimbo1976

If you do remortgage then you would have the same range of products available as you do now. ie there will be some products which offer free valuation and conveyancing, no fee etc but you would pay a higher rate. Generally what lenders give with one hand they take with the other. You would need to have a solicitor/conveyancer to do the legal work.

I am slightly sceptical that even if you dilligently overpay that you will get the LTV down to 75%. The biggest variable is house prices and this in turn influences the surveyor who would end up valuing your home for a remortgage. Valuing a property is a dark art rather than a science.

These forums are littered with people who have started the remortgage process and then hit a wall when their home has been downvalued by the surveyor.

GMS

Taking a variable rate for 12 months to lower your LTV carries risks

• The variable could increase making payments higher
• Property may be valued at less
• Rates of today may not ba available when you want to remortgage
• Fees involved may wipe savings

A long term fixed today looks cheap when compared to historical rates.



Do the sums carefully and consider the risks of a plan which can quickly go wrong.

getmore4less

Hope its not a new build.

YoungBusinessman

If its a new build then avoid, value will drop.