Applying for First Direct 5 or 10 year fix...

pamelab21

Our mortgage is due to end in June (1st sub account ends April but we want to allow the two to end and then bring them both into line).
I have been looking at the following
First Direct 1.94% fee saver 5 year fixed
First Direct 2.49& fee saver 10 year fixed
mortgage will be approx. 120k, looking at it over 21 years. house value approx. 260k so low ltv.
We are current FD customers. no bad credit etc.
I make most of the mortgage decisions alone as hubby less than interested and seems to have no opinion. I know no one has a crystal ball but I am guessing interest rates are only going to go one way.


I am calculating the following based on the online calculators:


5 year fixed £580.00 per month, after 5 years owe £95,697
10 year fixed ££612.00 per month after 5 years owe £96,836


with the £32.00 extra per month I would pay on the 10 year fixed, that would be £1920.00 over 5 years more and add that to the £1139 difference in whats owed after 5 years I make that the 10 year will cost us £3059 more (poss more if interest rates don't dramatically rise).


How do I work out what interest rates would need to rise to, to make locking in to the 10 year fix a good deal? Is there anything that would calculate this for me?


Also looking to overpay at least £100.00 per month so technically could overpay the 5 year fix by £130 per month as we could still afford the 10 year fix with a £100 overpayment a month.


Any suggestions anyone? We are not planning to move from this home at all, children both in Primary etc so not worried about redemption fees to much on the 10 year fixed.
Thanks!

TrickyDicky101

What I think you are asking is "what is the highest rate I could take after my 5 year fix has ended so that after another 5 year fix I was in at least no worse a position than had I taken the 10 yr fix to begin with" - is this correct?

Assuming you paid exactly the same amount in monthly payments to each mortgage option (ie so even of the 5yr deal you paid £612pm so an implicit overpayment) then after 5 years @ 1.94% you would owe

£93,687

After 10 years on the 10yr fix at 2.49% paying £612 pm you would owe

£70,833

So whatever rate you take at the 5 year point (for total term of the remaining 16 years) should leave you with £70,833 outstanding balance at most after another 5 years assuming you continue to make payments each month of £612.

I calculate that your new 5 year mortgage in 5 years' time would need to have an annual rate fix no higher than about 3.25% for this to hold true. Any higher and you will owe more at the end of year 10.