Do I need a mortgage?

Robzilla

So, here is my situation.

I recently found out the owner of the apartment that I currently live in is looking to sell. She is going to put the apartment on the market for £130k but I have managed to negotiate for £125k so that I don't have to pay stamp duty.

My nan is in poor health and wants to give me £100k combined with my own finances I can afford to by the apartment outright without a mortgage.

Here comes the hard bit....

My nan is moving to a new build which has been delayed to early in the new year. So where as i was hoping to buy outright it now would seem that I need to get a mortgage if i want to but this apartment.

If i want to pay off my mortgage within a year, or possibly two years how should I go about this? It all seemed so simple two weeks ago but now I am not really sure what to do. This is the first house I have ever brought so i'm a complete novice to this. I was hoping to be mortgage free from the offset so that I didn't have to pay any additional fees.

Any advice on what type of mortgage I should be looking for would be very welcome.

Robert

ermine

To do exactly what you want you simply need to specify a mortgage that offers flexible repayment terms. Might be worth using a mortgage broker because you also want to minimise the deliberate complexity mortgage firms make of high arrangement fees in return for a lower interest rate. If you are only going to hold the mortgage for a year, then you probably want to minimise arrangement and termination fees, even if it means taking a higher interest rate. It is the total amount you are going to repay that matters, not the headline interest rate.

With a mortgage broker they can do the what-iffery and provide repayment illustrations given what you specify, although it's perfectly possible to do this yourself using Excel, or a pencil and paper with a calculator if you.

An offset mortgage product would also work - when you get the money you set it against the mortgage which reduces the interest you pay to trivial amounts.

MallyGirl

I would go offset if you can as it is so flexible

getmore4less

long term low cost offset tracker

when the money arrives offset but keep the mortgage zero ongoing cost unless you access the money,

easy access to cheap money.

Tahlullah

Definately recommend an offset. You retain control and no limits on overpayments, which means when you do get a lump sum, you can pay off the loan without penalty.

Congratulations on buying your first home!

Robzilla

Seems like long term offset tracker seems to be the way to go. I have just been reading up on MSE.

When you say "Long Term" how long would this be? 25 years?

I've gone from a position of almost being mortgage free to now realising I need one, all be it for a couple of months, but if i can gain greater flexibility using a mortgage thats great.

Where should i be looking to get a long term low cost offset tracker? I bank with First direct although i still have a halifax account. From what i've read arrangement fees on these types of mortgages are high so i want to keep these down to a minimum.

Tahlullah

I bank with FD and they do offer a range of fee free mortgages as well as those with fees. With them, you choose fee free and pay a higher interest rate or pay a fee and get a better deal.

I can only say good things about them as a bank and mortgage provider, but do shop around.

getmore4less

with offsets you start with FD use that as the benchmark for all others.

Robzilla

So with the 25k which I want to offset for the mortgage is currently in cash ISA's. Can I offset against the ISA's (which are currently with Virgin).

Lets say I pay the mortgage off within two years, I'm going to loose the years I have been saving in to them if have to switch them into a normal savings account right?

ermine

Robzilla wrote: »

Can I offset against the ISA's (which are currently with Virgin).

No. You have to hold them with the mortgage company. I've never heard of an offset mortgage against a cash ISA with the same institution, though it's a damn good idea!

Robzilla wrote: »

Lets say I pay the mortgage off within two years, I'm going to loose the years I have been saving in to them if have to switch them into a normal savings account right?

Yes, you lose the tax-sheltered basis for that money. If that's a concern (it would take you about five years to save that amount back into ISAs) then you might favour paying interest on the money. You're going to be paying more interest than the difference the ISAs make - if interest rates remain low for several years as Mark Carney seems to be intimating you might be able to save the unsheltered cash back into ISAs while interest rates are low and the ISA/non ISA difference isn't much...

getmore4less

AIUI the only ISA offset is Barclays.

You can't offset the deposit.

Another option might be offset plus if the donation money is available but needs to be kept till the move happens