Can anyone help me understand mortgage?

Manchester-Man

Hi all, thanks for reading.

Me and partner are looking to buy our first house it's price is 125k but we believe would get it for 120 from the estate agents, we've got 5% deposit and our bank have given us an AIP for the 116,000 at 4.8% fixed for five years with 5% deposit. We worked this out to be 640 a month repayments. I've been trying to read a lit but something I still don't understand, in five years time, what happens then, when we are on the variable rate? Could we fix it elsewhere?Or fix it again with them? If we wanted to. It says fixed for five years then will be on our variable rate for the remaining period. They all say that though. I'm presuming that doesn't mean you can't fix it again after the initial 5 years? I know we could get a lower % of we had a higher deposit but we don't. We have 10,000 saved, and that needs to be used for fees too. We can afford the 640, but wouldn't want it going up much more. Over 700 and we'd find it difficult, so she is worried about what happens in five years time. Can anyone advise us? Thanks.

Manchester-Man

Sorry it should say 114,000 after the deposit, not 116,000.

elverson

Yes, after five years you can remortgage to a new fixed rate deal, either with the same lender or a cheaper one.

The SVR could be lower than your fixed rate - for example, HSBC's current SVR is 3.94% - in which case you'd save money by not remortgaging.

As you'll have some equity in the property your LTV will be lower than it is now (you will start with 95% LTV), so you *may* be able to fix at a lower rate in the future, but this also depends on how the base rate changes between now and then, which nobody can predict.

Manchester-Man

Thank you I get that now. Would there usually be some sort of fee to move to somebody else cheaper?

MortgageMamma

Manchester-Man wrote: »

Thank you I get that now. Would there usually be some sort of fee to move to somebody else cheaper?

There are two things you do at this stage

1, check the lender you are with and what deals they have for you

2, check the lenders offer of a mortgage against other remortgage products and work out if you are better of staying with your lender or remortgaging to another lender.

Are you using a broker or have you gone direct to the lender? I have a handy guide I can send you which explains these things, it might be a good idea for you and your partner to sit down and read through it. Its important you know what you are signing up for, a mortgage is a big commitment.

AnotherJoe

Manchester-Man wrote: »

Me and partner are looking to buy our first house it's price is 125k but we believe would get it for 120 from the estate agents.

I doubt that. You'll be buying from whoever owns the house, which is unlikely to be the estate agents.:D

Manchester-Man

Yes please Mortgagemamma that would be useful. It's from our bank the mortgage offer, think I'm correct in saying we would have had more choice if we had a bigger than 5% deposit, but we can't raise it (I actually had the idea of working out of I got a personal loan and used that as deposit, but surely wouldn't save us any more being unsecured and everyone would be doing it, I'll work it out for peace of mind though). We could get it lower off Natwest I think it was as low as 4.0 but that was only for 2 years and we like the security of knowing what we're paying as not in much of a position to be taking any gamble at the moment.

phatbear

Manchester-Man wrote: »

(I actually had the idea of working out of I got a personal loan and used that as deposit,

Your mortgage provider will want to see where your deposit has come from and it cant be made up of a loan.

Manchester-Man wrote: »

we like the security of knowing what we're paying as not in much of a position to be taking any gamble at the moment.

I thought this way when i bought my flat following a relationship break up, and I "knew" that I wouldnt be moving or buying a new place in the next 5 years. Fast forward a year and met someone and ended up buying a much bigger place together which ended up with me having to pay the bank off a sizeable surcharge due to ending my fixed term early. I appreciate this scenario may not apply to you but what if you had to move due to work etc?

MortgageMamma

Ok, I'll probably get slated for doing this but inbox me your email address and I will send the guides. I've not written them myself and I'm not trying to hook you for business, I'm just doing it as I believe everyone should get proper advice and know what they are doing when getting a mortgage. You won't get proper advice from a bank - have you applied for the mortgage or have you just got a decision in principle? It may pay to shop around a little especially if you are on a budget

MortgageMamma

I should point out that if you prefer there are also some good guides on this site, I will go and find the links and post them on here for you are I don't have the links saved

MortgageMamma

Here it is, go to this link, read through the guides and you should feel a lot more confident http://www.moneysavingexpert.com/mortgages/?_ga=1.103753028.558480766.1458559749