Deposit and 2 year vs 5 year

tkb7

Hi!

Couple of questions;

1) We have been to a mortgage advisor and been shown 5 year fixed term mortgages. Which we were fine with because we don't know [STRIKE]anything[/STRIKE] very much about this stuff. However, we've now had someone who has had more experience in house buying say they would always recommend a 2 year fixed mortgage.
I was just wondering what everyone on here's opinions was on that subject

and

2) We have enough for 5% deposit and obviously taking it to 10% makes a huge difference in terms of how much we pay back every month and the rate of interest. We can't quite manage to get to 10% but can get closer to 8%. I was just wondering if there was any point in going to that or if we can't get to 10% we may as well stay at 5%? If that even makes sense.

Thanks!

[Deleted User]

The more deposit you put down, the less you will need to borrow and therefore the less you pay in interest.

The 2 v 5 year argument is down to what's on offer, whether you plan on moving, what your appetite to risk is, etc.

tkb7

Deleted_User wrote: »

The more deposit you put down, the less you will need to borrow and therefore the less you pay in interest.

The 2 v 5 year argument is down to what's on offer, whether you plan on moving, what your appetite to risk is, etc.

We spoke with another advisor last year who was looking at the two years and said after the two years is up you can get another deal or remortgage, is that right?
He had a very strong Irish accent and spoke quite fast so I struggled to understand him most of the time. :doh:

[Deleted User]

tkb7 wrote: »

We spoke with another advisor last year who was looking at the two years and said after the two years is up you can get another deal or remortgage, is that right?

You can certainly try. Whether you can get one that suits you is another question.

If you think rates will be the same or lower, it may be a good idea. If you think rates may move upwards over the next two years, it may not.

Lokolo

There's also the question on your LTV.

If rates stay the same, but in 2 years you can get down to 90% LTV rather than your current 95%, then you'd likely be saving money over the 5 year fix. And even more so if you can get it down to 85% in 2 years.

Again, assuming rates stay the same.

edit - just to say, you must remember that there are usually product fees. so with a 2 year fix you'd have to pay for a new product fee in 2 years. This could influence the cost benefit.

tkb7

Lokolo wrote: »

There's also the question on your LTV.

If rates stay the same, but in 2 years you can get down to 90% LTV rather than your current 95%, then you'd likely be saving money over the 5 year fix. And even more so if you can get it down to 85% in 2 years.

Again, assuming rates stay the same.

edit - just to say, you must remember that there are usually product fees. so with a 2 year fix you'd have to pay for a new product fee in 2 years. This could influence the cost benefit.

Where would I find this figure? Or work it out?:doh:

Well my partners wage increases every year for the next 4 years. So, in two years we are going to be in a better position. I will also be able to get back to work in two years when my youngest starts at school.

juniordoc

You could also look at a 3 year fix as a compromise which many lenders also offer.
Have you already offered on a property? If not you may be able to get to 10% deposit before you need to do a full mortgage application

John-K_3

tkb7 wrote: »

Where would I find this figure? Or work it out?:doh:

Well my partners wage increases every year for the next 4 years. So, in two years we are going to be in a better position. I will also be able to get back to work in two years when my youngest starts at school.

You can work out how much you will pay off the mortgage with any of the online mortgage calculators, but LTV also depends on the value of the house when you remortgage, and you can’t know that yet.

If it has hpgone up you could easily be below 90% LTV, but if prices drop then you could be in negative equity.

getmore4less

based on 5% deposit how much are you trying to borrow?

How much can you afford to pay every month?

tkb7

getmore4less wrote: »

based on 5% deposit how much are you trying to borrow?

How much can you afford to pay every month?

We are needing to borrowing £175,750 with a 5% deposit.
Repayments are £820.90 per month which is manageable but it would maybe be on the tighter side especially because most of our deposit was a loan from MIL and we need to gradually pay that back.

tkb7

juniordoc wrote: »

You could also look at a 3 year fix as a compromise which many lenders also offer.
Have you already offered on a property? If not you may be able to get to 10% deposit before you need to do a full mortgage application

We have already offered on the property unfortunetly. So looking at getting the application in either today or tomorrow.