Mortgage - how long to fix?

supersezzie

Hi, I'm a first time buyer and could use some advice on picking a mortgage. My adviser recommends Leeds building society and I'm choosing between fixing for 2,3 or 5 yrs. The 5yr option costs an extra £1000 in roughly which I could get together if needs be but the monthly payments are still affordable - only £35 more than the 2yr fix.

I'm just wondering what I need to consider. For example, when the 2yr fix runs out, is it common and easy to switch to a new deal and what kind of costs are incurred with a switch? Also, is it as stringent criteria or are lenders more likely to lend you the money as you already have a mortgage?

My main considerations are that a shorter term could be a benefit as I'm buying with my boyfriend so if we split up and he wanted off the mortgage we could do it sooner (pessimistic I know, I don't think this will happen! But we are getting a deed of trusts as it is mostly my money). On the other hand, or circumstances trend to be quite changeable and I'm thinking of either swopping one of my two part time jobs for self employment or further training, in which case will it be better to fix for longer and would I potentially become less likely to be accepted if I needed to switch deals?

Any thoughts would be much appreciated! Thanks!

afly

supersezzie wrote: »

My main considerations are that a shorter term could be a benefit as I'm buying with my boyfriend so if we split up and he wanted off the mortgage we could do it sooner (pessimistic I know, I don't think this will happen! But we are getting a deed of trusts as it is mostly my money).

The lender will not allow them to leave the mortgage unless you can demonstrate you can afford it on your own or arrange a transfer of equity with a new party. Just something to bear in mind

supersezzie wrote: »

On the other hand, or circumstances trend to be quite changeable and I'm thinking of either swopping one of my two part time jobs for self employment or further training, in which case will it be better to fix for longer and would I potentially become less likely to be accepted if I needed to switch deals?

Some lenders need as little as a years accounts for self employed. Most high streets seem to be 2. At 3 years, you can target most lenders. I have no idea how that would tie in with a part time job also though. My guess would be combined income assessed as self employed

MarkBargain

What rates are they offering? Will you be in a position to make overpayments at any point?

Yorkie1

Bear in mind that when you remortgage / change product, you will in all likelihood incur costs (application fee, surveyor, legals). Some people prefer not to have to pay these every 2 years if their circumstances otherwise are consistent with a longer fix.

supersezzie

Thanks guys.

So, apart from the extra fees, it's perfectly possible to reapply within 2 yrs provided I'm still mortgageable??

I think the 5 yr fix could be winning out here actually. The interest rates are 3.10% for 2yr, 3.45 for 3 and 3.69 for 5.

I doubt overpayments will be an issue!

ExpertAdvice

Whats the Loan to Value?

dimbo61

Another point to consider is LTV
Say you put down 10% deposit and get a 90% mortgage in 2 years time you will do well to get to 85% LTV.
Now if you take the 5 year fix you may have paid off some of the debt and we hope the property May? have increased in value so you are then looking at 75% LTV and better deals.
If you have a strong relationship ? and see yourself in the same property in 5 years time ? ( not a one bed flat and you want 3 kids in the next 4/5 years as the CLOCK is Ticking!!!)
3.69% fixed for 5 years is a good deal I know we paid 4.74% for our 5 year offset fix

supersezzie

Hi guys, thanks for all this. The LTV is 80%. It's a two bedroom flat so no planned reason to move in the first 5 yrs though you can never guarantee it can you, and I don't see us splitting up either. I'm aiming to settle there though you never know!

One thing that's worrying me is the extra fees - and the costs of those and potentially losing them if the sale falls through for some reason. We're waiting for the owner to extend the lease and whilst I want a quick sale, I'm holding off for as long as possible before spending out.

That fees issue makes me more inclined towards the 3 yr deal, but on the other hand, I might be embarking on another degree which, whilst affordable in reality terms, might put me in a lower income bracket and make it harder to get a new mortgage but a 5 yr deal would give me the time to complete this and get back on the career ladder!

Oh it's complicated!!

The 5 yr deal is portable if we move house. So would that mean that it pretty much covers all bases, even if we did have to sell in that time??

jamesd

Why not avoid future fees by going with a lifetime tracker deal? Unlike a fix they don't revert to a possibly expensive SVR, just carry on tracking. And you're never forced to remortgage at a bad time just because a deal ends, because the deal is until the end of the term.

Of the fixes, five years seems most likely to be best, just because it's likely to take no less than a year for there to be a significant increase in interest rates. So a short fix will just mean you paying more in interest than you might pay for a tracker.

Porting a mortgage is normally subject to new underwriting at the time you port. So if you didn't meet the criteria then, you couldn't port. No difference between fixed and tracker deals in this aspect.