First time buyer Mortgage advice

MAZ123

Hello,

I'm in the processing of purchasing a flat for 390,000. I'm looking at 85% LTV mortgages. My bank (First Direct) has offered me a fixed 2 year @4.49%. (APR 3.9%)

Now my question - since I've got a fairly large loan should I be focusing on getting the lowest interest rate for the first couple of years, or sick with First Direct considering that the overall cost of the mortgage will be lower than others due to a lower SVR?

What are the risks of chasing the best best rates every couple of years?

Maz

Let_Us_See

Not enough information to answer your first question.

However, you would be foolish not to consider chasing the best rates every couple of years.

GMS

Why a 2 year fix? Have you looked at longer term fixes? Rates currently low so may be worth considering a longer term for payment security.

Changing every couple of years can incur fees and no guarantee any better rates will be available at the time.

JimmyTheWig

MAZ123 wrote: »

Now my question - since I've got a fairly large loan should I be focusing on getting the lowest interest rate for the first couple of years, or sick with First Direct considering that the overall cost of the mortgage will be lower than others due to a lower SVR?

You really need to consider the mortgage for the whole time you are planning to live there. But that doesn't mean you have to keep the same deal for all that time. If you are happy to remortgage after your initial deal is up then the SVR becomes slightly irrelevant.

What are the risks of chasing the best best rates every couple of years?

There are two parts to this question.

The first part is that rates may have risen dramatically in two year's time. If that happens then the SVR that you will revert to and the interest rate of any new deals you are looking at will have gone up. Would you be able to afford this?
In two years time you are unlikely to have cleared much of the capital.
For this reason you may prefer to look at a longer term fix (e.g. 5 years).

The other part of the question involves getting a good deal now with a high interest SVR after it. In "normal" circumstances there is nothing really wrong with that, as you can just get a new deal. But what if external factors change?
E.g. if the mortgage market gets tighter and there are less deals on offer? Or if you lose your job and can no longer secure new lending? Or if house prices have fallen and you end up in negative equity so no-one will give you a mortgage? Or you are planning on moving soon and don't want to be tied in on another deal.
You might then be stuck on a high SVR.

You need to consider the risks on both parts and decide to what extent they apply to you.


The other thing to bear in mind is that you generally pay fees when taking out a new mortgage product. So don't just look at the interest rate.
Though in your case you will have a high loan, so the rate is probably more important than the fees.