Advice Needed [First time buyer]

SCHAM

Hi all,

Just looking for some advice if possible.

My partner and I have agreed to buy our first home for £295,000, with a 10% deposit.

Our mortgage would be £265,500.

We've looked at deals and initially decided to do a 5 year fixed mortgage @ £1200 per month. We are able to pay back 10% without charge.

Now, this is where I am a little confused.... Would it not be sensible to do the mortgage for 30 years @ £1000 per month, and just pay the difference of what we would have paid anyway (£200) ?

The benefit I see here is basically if the 'worst case scenarios' (illness, sacked etc.) happen at any point, we would only be tied into a mortgage for £1000 per month, as opposed to £1200.

Am I right with my thinking? Because on the face of it, it seems purely logical to go with the smaller mortgage/longer years and overpay...

Any advice appreciated.

ACG

Some people do that. But most people will find reasons to not overpay, so at least if it is an actual commitment they have no option, but you are right it gives you more flexibility if you need it.

GoingOn30

As above depends on how disciplined you can be. You can compromise and do 26, 27, 28 years tho, no need for it to be 25 or 30.
I would also recommend a 2 or 3 year fix tho as it looks like you would then reach a better LTV bracket and be eligible for better interest rates.

SCHAM

Thanks both - I wasn't sure if there was some sort of 'catch' or I understood it wrong.

I'll also look into the 2/3 year fixes for that reason too, thanks for the advice.

dimbo61

When you say you can overpay by upto 10% of the outstanding balance each year Do you have £26,000 spare ? Or say £2,000 a MONTH ?
That is a monster of a mortgage and rates have never been this low.
Maybe the security of a longer fix and Big overpayments each month once you have 3/6/9 months of Income in emergency savings.
By overpaying and normal mortgage payments you could be 75% LTV in 5 years

getmore4less

+- £50 on payment for rounding
£265,500 @ £1,200pm 25 years is a rate range 2.19%-2.93%
£265,500 @ £1,000pm 30 years is a rate range 1.76%-2.51%

Suggests your rate is between 2.19% and 2.51% @ 90% LTV
say 2.42% that makes the payments £1,040 & £1,180.

paying £1,200 in 2 years left with £249,175

2 year fix rates are closer to 1.8%, £955 £1,100
paying £1,200 in 2 years left with £245,923

could save around £3,200

In 2 years your LTV will be around 85%(80% with HPI) what rates could you get then against a rate rise over the 2 years.

Today 85% LTV 5y seem to be around 2.1% and 2y around 1.5%

SCHAM

This makes a lot of sense now; and a 5 year fix at the minute seems like completely the wrong thing to do?

We can comfortably pay £1200+ per month for the motgage. Based on that, it does seem to make more sense to take out a 2/3 year fix then remortgage with a better LTV.

@Dimbo61 - We wouldn't overpay £26k per yer or £2k per month, I just mentioned the 10% as that's what the bank told us.

What I'm thinking of doing is...

3 years fix @ 2.19% - over 23 years/6 months @ £1205.29 per month.
After the 3 years, we would owe £238,673.83 - very close to 80% LTV so we would make that happen.

Surely that makes sense over my initial, 5 year fix option. Seems silly thinking back to that now...

SCHAM

I just phoned the bank there and the man dealing with the mortgage 'assured' me that a 5 year fix was the way to go....

Is it in his best interests (personally) to tie me down to the shortest length mortgage and highest length fixed rate deal possible? Meaning I pay more... Might be a silly question. Emphasis on the 'him personally' part.

Thanks...

RedFraggle

He is an employee of the bank and not independent advice.

getmore4less

Ask him to put this opinion in writing with the reasoning and justification on why it is better than other options?


It is possible to quantify the situation and put real numbers on when one option would be better than another to make more informed choice.

SCHAM

RedFraggle wrote: »

He is an employee of the bank and not independent advice.

In which case he shouldn't care which option I go for.... and shouldn't be advising me at all?