Help me choose the best mortgage way forward

Mover555

Hello,


We've got to the stage of offer accepted and need to sort out our mortgage.


We're buying for £320k with a 15% deposit from our existing property sale.


The mortgage will be £272k.


We already have a mortgage with a building society which we can port, adding a top up to cover the rest.
This is £150k at 4.99%, fixed for the next 18 months.
Adding £122k at 2.49% fix for 2 years.
Total monthly payment of around £1210 if we take the 35 year term the building society are saying we'll have to.


We can't afford much more than this in our monthly repayments, but might be able to overpay a little to try to reduce it.


Then we'd consolidate after both terms have run out into a single, hopefully cheaper mortgage.


If we exit this mortgage, we have to pay a £6k early repayment charge.


The other option is to pay the fine and take the whole lot out with a new provider - I have had a decision in principle for the whole amount over a 25 year term with a new bank. This is at about £1280 per month.


As we plan to have kids in the next two year, and income will drop, I am keen to keep monthly payments as static as possible. The first option is worrying as we'll have to change product potentially right at the point our income is at its lowest. Does this matter?


A third option the building society mortgage advisor suggested was paying the fine and moving all to a new 35 year mortgage at £1020 per month (2.69% fix) but overpay £300 which reduces the term to 24 years. This seems appealing because of the low rate, but loses us £6k.


All advice very welcome, I'm finding this pretty complex!

Thrugelmir

Mover555 wrote: »

We can't afford much more than this in our monthly repayments, but might be able to overpay a little to try to reduce it.

As we plan to have kids in the next two year, and income will drop, I am keen to keep monthly payments as static as possible. The first option is worrying as we'll have to change product potentially right at the point our income is at its lowest. Does this matter?

Personally I would think twice before committing to such an undertaking if money is likely to be tight. All eyes are now on the USA. When the Fed finally increases interest rates it will most likely signal the end of an era. With only 18 months and 2 year product terms. You'll be left exposed to what future rates might be. I certainly wouldn't be basing them on today's low levels.

amnblog

Will the last one out please turn off the lights!

Jhoney_2

amnblog wrote: »

Will the last one out please turn off the lights!

What lights? There isn't anymoney...

Mover555

Yes that's what I'm worried about - at the time I consolidate the 2 parts of the mortgage, interest rates will likely be loads higher. We can afford it now but don't want to be overstretched later on.


I guess at that point there might be lots of people diverting to longer terms than usual! I wonder if a 5 year fix might be a better buy.