First time buyer looking at mortgages - fixed terms

toml85

I am a first time buyer in the process of buying my first flat and there are a lot of mortgage options out there. I would like a fixed rate mortgage as knowing how much my repayments are going to be is very appealing, especially as this is the first time I will be responsible for all household bills etc. The main choice is length of term. The way I see it, a 5 year term offers protection from the expected rate rises over the next few years, but costs more. A 2 year offers a lower rate which means overpaying is easier, but means that in two years I need to switch deal, probably with higher rates and the costs involved in doing so.

Does fixing for the longer term make sense? I'm borrowing at 70% LTV.

jonnyb1978

Having the same thoughts.
I like the idea of a 5 year but coming to the conclusion that the first 2 years will be money wasted however the following last 2 or 3 glad I will have fixed. Only problem then is that after 5 years I'm assuming the interest rate will have maxed out and so will be looking at new new product with the highest rates.



I'm probably going to go for a 2 year whilst rates start to rise then lock in a 5 year as they are continuing to rise. It might be at a higher rate than now but I should have a lower LTV by overpaying on the 2 year deal, therefore hopefully keeping payments the same over the whole 7 years. Plus I'm more or less guaranteed a pay rise of at least £1200 a year so will be quite flexible after the initial 2 years are up.

Or I could be totally wrong as its a guessing game

dirty_magic

I made a thread on this the other day and got some helpful advice. It should be on the last couple of pages.

I'm going to discuss it with a broker as I still don't know what to do. It sounds like hassle to remortgage in 2 years but the rates are so much higher for 5 year fixes, I don't know if it's worth it. You're in a better position with a 30% deposit though.

London18

Don't forget fees which can make a big difference between one longer fix and 2 shorter ones. It is using a comparison calculator to out al the information including fees and rates. This spread sheet helps compare
http://locostfireblade.co.uk/spreadsheet/Index.html


Remember too that at the end of the 2 year fix your lender may have reasonable product transfer options which are often fee free if you are not changing the term of the loan. It's always worth looking at those as well as a full remortgage at the stage.

jonas123

Also don't forget that there are penalties involved with coming out of a fixed deal. For example, if you're thinking of selling in 2 years and going travelling, a 5 year deal is obviously not a great idea. You can generally port fixed mortgages to new properties, but again you need to be aware of the lower flexibility of fixed rate mortgages.

kwmlondon

Personally, I think it's just a huge gamble. I took out a 5 year fixed rate 3 1/2 years ago and I've been paying back at 4.3% so it's cost me quite a lot. On the other hand, I've had peace of mind and my only worry is how high interest rates could go when I'm eligible to remortgage without incurring a penalty. Depends on how much of a risk you're prepared to take. I'd rather pay a couple of thousand overall than risk having my monthly payments rocket, but that's me.