Help to buy 2 or 5 year fix?

david171

Hello!

We are in the process of buying a new build for 311,000 (33K deposit and 62K from government) using help to buy and have just had our meeting with the house buyers recommended help to buy agent.

He only recommended products from Santander, no other lender was mentioned - not even in passing or comparison - am i being skeptical in assuming this is where he makes the most commission?

I know no one has a crystal ball but would you opt for a 2.5 year (1.84% monthly repayment £700) or a 5 year fix at (2.59% monthly repayment £783),

My current job contract comes to an end in 2 years time, so Im worried about getting a good remortgage deal if Ive just got a new job - and finding a job at a similar salary/level (35K) may be easier said than done. My wife is currently on £32K but we want to start a family soon, and she doesn't want to work full time.

Also looking online myself I've found 3 better 5 year deals with Virgin (2.39% - £760 PCM), Skipton Building society (2.35% - £755 PCM) and Natwest (2.45% - £768 PCM) - How can i broach these deals with the advisor without offending. He basically said he needed our answer on the Santander deal by Monday. I was thinking of saying a friend of ours is also buying a house on a near by development and they were offered these - hence can we have them too.

Out of the 4 banks which would people prefer? The advisor was super keen on Santander as he said their retention rates at the end of the fixed term were best on the market - but at present i cant see a Help to Buy re-mortgage product being offered by Santander - would that mean incorporating the help to buy loan into the remortgage? I know at present Skipton offer HTB remortgage deals? I worry we may struggle to pass the affordability if my wife goes part time if we need to incorporate the HTB loan after 2.5 years, as we are looking to start a family asap?

All thoughts appreciated

Thanks

kinger101

I don't know what you mean by "house buyers recommended help to buy agent". You're the house buyer. Perhaps you mean a mortgage broker recommended by the estate agent. If that's the case, I wouldn't use them. It sounds like he's talking rubbish anyway. Banks don't do special deals just because brokers know someone else buying a house.

If you think there's any chance you might have to relocate to find work, then a five year deal is going to carry heavy mortgage redemption penalties.

Personally, if my job was ending in two years and I didn't think I'd be able to find another of a similar salary, I wouldn't buy. If you wife has better earning potential than you, maybe you could work reduced hours instead.

GoldenShadow

Personally I'd go for a 5 year. We did. My contract was up within 2 years at the time too. Thankfully my new job has no probation period and so we are moving (again) hopefully soon. We can port our mortgage, though, and didn't use H2B, which is likely to impact porting I imagine?

From what I gather only certain mortgages are H2B, I expect the likes of the Natwest one aren't 'H2B mortgages' so you wouldn't be eligible for them but worth querying nonetheless.

david171

Hi Thanks for the reply,

The house builder said we have to use this agent in order to be eligible for the help to buy deal.

We have relocated many times before and decided because of our hopes to start a family, that we definitely want to stay here for at least 10 years as its within 1 hour drive to both sets of parents.

Both my wife and i have professional qualifications and salaries / prospects. Its not that i wouldn't be able to find a job, its just that finding a permanent position i.e moving away from more easy to obtain non-fixed term contracts would more than likely mean a decrease in salary - although i would hope to be able to progress back up. The salary would be at least 25K entry level.

My wifes job is permanent, with good maternity pay benefits (six month full pay). She wants to work 3 days a week if we had a baby but could easily step back up if she wants to full time in 5-8 years time.

My main worry is affordability should we have to consolidate the help to buy loan into the remortgage. or that me starting a new job so close to the 2.5 year limit would not meet their eligibility criteria - as in desperation i may need to take another short fix term contract or be on a probationary period

GoldenShadow

With the above description I'd personally pay more for a 5 year fix. Rates have dropped a bit more since we took ours out, but the extra £40 a month or whatever it is, is worth it for us for the peace of mind.

I know in some careers lenders don't mind contracts if its 'typical' for the line of work. I'm a chartered accountant and contracting is very common; they said as long as I had x years to back it up that it was fine, but in the end my uni degree counted as relevant experience and I just needed a year left of my 2.5 year contract.

Consider speaking to an Independent Financial Adviser/Independent Mortgage Broker perhaps? Mine was great. We paid him nothing, he takes commission from the lender if they run that way otherwise there are fees but I can't remember how much, reasonable for his service though. I pinged him an email the other day re moving again and he's right on the case and working out if we're best to get an entirely new mortgage and pay ERC vs porting and such. Makes it a whole lot easier to have conviction in the option we choose.

P.S we didn't plan to move away from here, hence the 5 year fix, but sometimes life throws curve balls. My Mum has a 10 year fix, I don't think I'd ever go that long. Oh, and don't forget the horrific £ childcare...sounds like parents aren't close enough to help regularly and could be worth factoring that cost in.

kinger101

Well, based on your both having jobs that might be 25-35K FTE, I'd go with the 5 year fix. But on the assumption that it may be neccessary at some point to;

(a) tighten belts;
(b) wife to return to FT earlier than expected; or
(c) you to find second PT job.

You might want to read this regarding what the developer is telling regarding using their mortgage broker;

http://www.thisismoney.co.uk/money/mortgageshome/article-2335973/A-wave-dirty-tricks-How-greedy-developers-ruthlessly-exploiting-flagship-scheme-help-struggling-homebuyers.html

Even if you've spoke to their mortgage broker, I think you're well within your right to tell them to go **** themselves and find your own mortgage.

kingstreet

david171 wrote: »

My current job contract comes to an end in 2 years time

Is there anything else in your employment or financial history which will cause some lenders to not want to lend to you?

Santander does not pay more to brokers than other lenders. In fact, that is true of Skipton and Virgin Money who do.

If you want to know why your broker has recommended Santander, ask. It could be affordability, mortgage term, product, criteria and they will tell you if you ask.

dimbo61

Just Google help to buy lenders and see how many lenders are in that market !
Have a look at the deals they offer compare to the deals from Santander.
I can get 1% deals but I have 50%LTV so little point looking at lenders who do not offer HTB mortgages

getmore4less

£216k 2.59% paying £783pm is a 35year term

In 5 years you still owe £194600 and the £62k(indexed)

Help to buy interest kicks in.

What's your exit plan from the HTB noose?


with any house price rises you debt could be going up faster than you are saving on the interest on the HTB bit being 0%

£278k 40y 3% £995.

With £4k a month coming in you should be able to afford a whole house.