swap to a 5 year or 10 year fix?

darkcamel

Im in a bit of a dilemma. Any thoughts from you mortgage experts? my IFA just says wait and see, but I want to swap before MR tick up as funding is withdrawn, economy improves.

Been offered the following 2 deals to switch from my lifetime tracker at 3.1% to either:
a) 5 year fix at 2.89% with 1k fee
b) 10 year fix at 3.89% with 1.5 k fee
the fee aspect doesnt bother me. this is with existing lender. dont want to remortgage with other lenders with all that involves.

a) will mean my repayments go down £40 / month, whilst b) will mean they go up £100 / month, which is affordable..

• over 10 years, IF rates rise in line with swap rates at 1,2,3,5, 7 and 10 years, i calculate I should save £11 -12 k over my tracker, but if i get 2x 5 year fixes, consisting of a) and then another 5 year fix at estimated 5% in 5 years, i would save £8k over the tracker.
• obviously if rates stay low for 5 years, it may be worth getting 2 x 5 year fixes, and overpay on the difference.
• the 10 year provides a lot of security against ir rises, and peace of mind, and no remortgaging in 5 years (if i or partner change careers etc). just 1% rise in IR will cost me £140/mo.
• term is 28 years.
• moved a year ago, no plans to move for a long time.
• erp charge is 6% over first 6 years dropping to 3%. both are portable so not concerned.

Any thoughts guys?

ACG

What about 5 year and overpay by the £40 or £140? This will bring your term down so even if rates have increased in 5 years your mortgage will be however much lower.

Im not suggesting thats what you should do... just a thought.

Triolette

What are the early repayment charges on a ten year fix?
If there was a reason to move could you afford these? How much equity do you have at the moment?

I like ACG's plan... Overpay. 10years is a long time to commit to something. There is a potential for relationships (making and breaking), babies, work changes and anything else which happens to a person over a decade.

I'm worrying about a five vs less fix at the moment.
We need a crystal ball...

darkcamel

Triolette wrote: »

What are the early repayment charges on a ten year fix?
If there was a reason to move could you afford these? How much equity do you have at the moment?

erc is 6% for 6 years, then 3% for the remainder. which on the total mortgage is a lot. as i understand it, i can port the mortgage at that rate, if i move (providing i didnt downsize) and providing i meet lending criteria, can take it with me. if bought bigger property, would be additional mortgage on the difference. i did this before on last mortgage. As I understand it, only if had to sell without buying another property, or downsize would erc apply, unless we lost our jobs or something and they turned us down.
Equity about 35%.
also just married. wife is going no where, been together almost 10 years

getmore4less

Do the numbers on the 5years paying the 10 year payment.

see what the rate would need to be to break even over 10 years.

My guess is probably over 8%

will do the numbers now.... back soon.

woops no amount given to do the numbers

dimbo61

Use "Whatsthecost" to work out much you will have paid off after 5 &10 years.
Consider the LTV ie 75% 60% when Remortgaging !
I would also take the 5 year deal and overpay by £140 a month.
You could reduce the term to increase the mortgage by £140 a month

darkcamel

getmore4less wrote: »

Do the numbers on the 5years paying the 10 year payment.

see what the rate would need to be to break even over 10 years.

My guess is probably over 8%

will do the numbers now.... back soon.

woops no amount given to do the numbers

if i over paid by £140 / mo over whole mortgage (or saved it, then over paid at end of year), i estimate it would take 4.5 years off the term. however no guarantee i would be able to do it over the whole term.
figures on payments are
£1090 at 2.89% (fee at 1k), £1228 at 3.89%. (fee at 1.5k). struggling to work out the break even point you mention ..

getmore4less

Mortgage size would have helped!

So we have
current is tracker 3.1% over 27years guess payment is around £1130
offers are
2.89% payment £1090
3.89% payment £1228
OK guess the mortgage is £245k

is this right

getmore4less

darkcamel wrote: »

if i over paid by £140 / mo over whole mortgage (or saved it, then over paid at end of year), i estimate it would take 4.5 years off the term. however no guarantee i would be able to do it over the whole term.
figures on payments are
£1090 at 2.89% (fee at 1k), £1228 at 3.89%. (fee at 1.5k). struggling to work out the break even point you mention ..

Since one of the options is the 10y fix you must be sure you can make that payment, that is the one I plan to use for the calcs over 10 y.

darkcamel

getmore4less wrote: »

Mortgage size would have helped!

So we have
current is tracker 3.1% over 27years guess payment is around £1130
offers are
2.89% payment £1090
3.89% payment £1228
OK guess the mortgage is £245k

is this right

close. it is £253k. term is 28.5 years. sorry error in my first post.

darkcamel

getmore4less wrote: »

Since one of the options is the 10y fix you must be sure you can make that payment, that is the one I plan to use for the calcs over 10 y.

yep, i think what i was saying would be if in the future rates were much higher say years 11-15, couldnt guarantee i could pay £140 on top. not a problem for the first 10 years. lets assume that i do though.