2 Year or 5 Year Fixed Rate

stubrem

Hi Folks,


New on here and appreciate any feedback provided.


My current mortgage deal is expiring and am considering whether locking in for a 2 year of 5 year fixed rate.


What are peoples general consensus on interest rates over the next 5 years, are we better to lock in for a longer term at a slightly higher rate or gamble on a lower rate for a shorter period.


Many Thanks


Stuart

Mortgage_Adviser

It is individual for every one.
I probably would never fix a mortgage for myself for 5 years as many things can happen within that time such as change in career, divorce, majour healt issues etc than could lead to a house sale and the payment of early repayment charges.

Neutrinno

No one has a crystal ball and can tell you what is likely to happen to rates in the next 5 years.

Are you likely to repay your mortgage/pay lump sums or move home within the next 5 years? Do you prefer to have long term stability of your payments or prefer to review it every couple of years? A 2 year fix may be cheaper now but risk it being more expensive in 2 years time when you next review.

getmore4less

Price up 2x2y against 4years into a 5y taking account of any improvement in LTV in 2y.

You can then work out how much rates can go up without being worse off.

stubrem

Thanks folks.


To go into a little more depth the current situation is as follows ;




(residential mortgage)


c.£299,208 dr outstanding


23y term remaining


Capital & interest repayments



1.49% fixed rate until 29/02/2020 (c.2y), offset savings account available, £749 arrangement fee payable to lender


= £1,290 pm whilst fixed (variable rate, currently 3.74%, thereafter £1,620 pm, although we can look at renegotiating on expiry)


OR


2.14% fixed until 28/02/2023 (c.5y), offset savings account available, £749 arrangement fee payable to lender





= £1,380 pm whilst fixed (variable rate, currently 3.74%, thereafter £1,620 pm, although we can look at renegotiating on expiry)


Now I will be offsetting the mortgage with around 100,000 pounds from remortgaging another property I own as a BTL.


Based upon this and the fact I am going to overpay as much as I can I am leaning towards the lower interest rate

getmore4less

What rate are you going to be paying on the BTL money.

stubrem

(BTL mortgage)
c.£80,000 dr outstanding, plus capital raising £62,500 to increase borrowing to £142,500 (75% of property value £190k)
25y term
Interest only

2.99% fixed rate until 31/01/2020 (c.2y), no arrangement fee payable to lender

= £356 pm whilst fixed (variable rate, currently 5.10%, thereafter £606 pm, although we can look at renegotiating on expiry)


did think this was a little high but considering not lending fee etc. I shall receive around 750 - 800 pcm rental on this house. I will be using the surplus to pay extra funds into the residential property

getmore4less

Borrowing money at 2.99% to invest at 1.49%

WHY.

Even with the tax offset you will be losing money.

stubrem

hmm, you may have a point but let me clarify further.


My main driver is to pay off my residential mortgage. I am in a well paid job at present but it means a large amount of time out of the country. In the future I want to return home on a permanent basis to my wife and child and am looking to cut my monthly expenditure to allow me to take a lower paid job


For the let property, I currently receive 800 pcm from the tenant on a mortgage of around 475. I then require to pay tax on the excess. In addition, as I am a contractor with my own ltd company this also limits my tax efficient income.


My high level thought was to take all my savings and put them into an offset mortgage, combine this with funds from the BTL property and drive my outstanding mortgage amount to around 150k. Then over the next xx years pay as much as I can on the residential mortgage to get my monthly mortgage payments down to a lower level.


Really appreciate your time on this one

getmore4less

Raising the mortgage won't help the income issue when you can no longer deduct the interest from the rental income..

Have you considered gifting it to the wife.

stubrem

apologies , gifting what to my wife - the second home ?