Mortgage advice required

ro2778

hello I'm a first time buyer,

I put an offer on a flat for 113,500 which has been accepted. I need to borrow 90% LTV or 102,150. I take home £2500 a month after pension, student loan and taxes. I'll probably spend a max of £250 on bills, service charge + rent is £120, £120 on food, £100 on travel, £300 on leisure / gifts / going out etc. I plan to get rid of my car as it's a city centre flat, I have no other loans or debts. This leaves £1600 which I could potentially spend a month on the mortgage. Also I have some friends who are interested in moving into the spare bedroom if needed but at first I'll probably live alone. For the first 4-6 months I'll probably need £500 a month to sort out furniture, buy text books for pending exams and build up my emergency finances, subscriptions and exam fees.

My aim is to reduce my mortgage to at least 85k after 2 years (max would be a reduction to 70k). I can see there are many repayment routes e.g., a 10 year fixed term, or e.g., a 30 year+ discount variable with no early repayment fees, or something in between. I just can't decide which way to go, I can't even work out if it really matters given how my main focus will be on large scale capital repayment. Any thoughts? What am I not considering or taking into account?

Carpi09

If you plan on living in this flat for 10 years then you could fix for 10 years. If not, fix for less, I wouldn't want to be stuck with a mortgage for that long and penalised for having to switch early on.

ro2778

I meant 10 year mortgage length with fixed repayments but I would only do a max of 2 year initial "discount" period.

getmore4less

With a salary in excess of £40k income multiple and affordability should be fine.

With plenty of cash flow you could look at offsets.

Don't see any need to fix a good low rate tracker with overpayment although with the LTV may not be much available.

is this some sort of shared ownership with rent as well?

if it is check the rules on selling and buying the rest of the place carefully.

ro2778

I've been looking into mortgages now for a few days and I have to admit I struggle with the language a bit. I've never even heard of offsets!

But your advice is, if I can't get an offset then I should go for the lowest rate and lowest fee mortgage possible with the option to make early repayments freely? Where's the best place to read about offsets?

The situation is pretty simple. I will be the sole applicant for 100% ownership of the leasehold on the flat. I will live alone but i have an extra bedroom and a few friends in the area who may be interested in moving in at a later date but this would be an informal arrangement and doesn't form part of my financial plan.

getmore4less

Depends what rates are available fees etc. without a more in depth few of the finances the optimum solution could be one of many options.

A less than optimal may be have features that you like for your circumstances.

Offsets are available from a few lenders they offer greater flexibility than a lot of other option but do tend to have slightly higher rates.

With the plan to improve the LTV significantly quite quickly a discounted deal may work out better in the short term.

As a base line I would start with, a tracker an offset and a 2y fix. then compare the potential state of play in 2 years based on your target saving/overpayments and a new LTV.

amnblog

Carpi09 wrote: »

If you plan on living in this flat for 10 years then you could fix for 10 years. If not, fix for less, I wouldn't want to be stuck with a mortgage for that long and penalised for having to switch early on.

A first time buyer fixing for 10 years would need to be certified.