First Time Buyer taking out a mortgage

EvilJaz

Hi All,

In the coming weeks i will hopefully be purchasing my first house.

At the moment i am intending to get a house around the £230,000 - £250,00 mark.

I have a few questions, hoping someone can help.

1) In the coming years i expect my salary to increase quite dramatically. As a result i don't really want to struggle financially thus have intended to take a 35 year mortgage. When i start earning more would i be able to negotiate the term down?

2) I am intending to take a 2 year fixed mortgage. Assuming i find a house i want and it costs £240,000 and i put 10% down (so a £216,000 mortgage) how much would i have to repay early to get my LTV to 15%/20% when i start looking for new deals after the 2 years?

Many Thanks

lee111s

Yes you will. The other option you have is to simply over pay your mortgage (different lenders have different rules on how much you can over pay per year). The easiest way to do it is when you come to remortgage in a few years time when your inital fixed period is about to expire, you simply change the term on the new mortgage to that which suits.

Depends on the rate of your mortgage. If you're on 4.39 (the rate I got for my 90% mortgage) then you'd need to overpay by about £300 a month to get be looking at 85% mortgages when your 2 years is up. That's on top of the £1000 a month that your mortgage payments will already be.

EvilJaz

Thank you lee111s for the quick reply.

Thank you, i knew i could after the 2 years change mortgage provider and choose what i'd like such as another 2 year fixed. Just wasn't sure if i could get that 35 years (well 33 at the time) reduced to say 23 years.

I was a bit silly not mentioning my interest rate. Probably going with YBS which has a good 2 year fixed mortgage rate of 3.74% (with £845 fee). Sorry for being 'stupid' but is this how it works (assuming 3.74%):

Outstanding Mortgage Interest Capital Payment
Start: £216,000 £673 £250 £923
Month 1: £215,750 £672 £251 £923
Month 2: £215,500 £672 £251 £923
Month 3: £215,248 £671 £252 £923
Month 4: £214,996 £670 £253 £923

And so on?

lee111s

Yes that'll not be an issue providing the new lender agrees that you can afford the new higher payments once the term is reduced, effectivley you're applying for a new mortgage so there's no reason you can't change the term.

Yeah pretty much. With a rate of 3.74 the payments would be as you say about £923 a month. To get down to 204k left on the mortgage (85% providing the house value remains the same) you'd need overpayments of about £250.

Check out http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator where you can play around with % rates and overpayment amounts.

EvilJaz

Cheers for the link. Exactly what i was after.

lee111s

No problem.

It's actually amazing when you see what you can do with your motrgage term by simply paying even an extra £50-100 per month!

EvilJaz

It really is, it's quite surprising.

It's definitely worth doing. Got to make sure i choose a mortgage which allows early repayments :P