What would you do with these mortgage options in my situation?

zeedee1

Hi, I'm looking for some advice.

I need a large mortgage (90%) LTV and am tempted to go for a 5 year fixed at 4.79%, partly because I don't want to get affected by any interest rate rises, and partly as it means I know how much I'll be paying each month. However, the monthly payment is a lot for 5 years.

The other option is to go for a 2 year fixed (around 4.39%) and hope that at the end of the two years we would have paid off enough to perhaps go down to a 85% LTV, and get a new deal.

I really don't know what to do as I'm aware the interest rates are at an all time low, but would it be silly to be paying a mortgage with a 90% LTV for 5 years? Or will the interest rate rise mean there won't be much difference for 85% LTV after 2 years?

I am in touch with a mortgage broker but of course he is saying it's our personal decision - so I just wanted to know what you MSE people would do as I have no experience with mortgages/interest rates!

Thank you for reading

amnblog

If you take the 5 year rate you need to be as confident as you can be that you expect to keep the property and the mortgage for 5 years.

If you consider that you will have that stability the next question is about the rate. Tying yourself to a 90% LTV 5 year fixed rate could be expensive but you need to ask yourself how will you cope if rates rise and you only have a 2 year rate.

You can tell from your illustration if you will be on target to take an 85% rate after two years (remember that the value may fall as well as rise or stay level).

Your illustration will also tell you what your payments will be if rates rise between now and 2019.

dimbo61

If you use " whatsthecost" and put in the details it will show you how much you will have paid off in 2 years at 4.39% and 5 years at 4.79%.
What is the difference in payments each month?
With the 5 year deal and a little overpayment each month you could be 75% LTV in 5 years!

Thrugelmir

Could you afford the mortgage at a 7% interest rate?

getmore4less

Work out what you can afford to pay each month an work back from that.


Do a proper 5 year budget accounting for everything and some contingency.


also consider any follow on rates as you cannot rely on remortgage as your get out of affordability.