How long to fix?

PerfectMess

I know the answer is how long is a piece of string I would just like some opinions from people who might have done this more than me...
We are in the process of buying a new home (not new build) which we intend to live in until we are old (in our 20s now). The house needs work doing which will hopefully increase its value. We will be taking an 85% LTV mortgage of £218000 and originally our plan was to fix for 2 years, do the work to leave us with a lower LTV in 2 years and remortgage to a longer fix.
But when checking rates with our current provider as porting and borrowing more the difference between 2,3 and 5 years is practically nothing. Monthly payments are 2 year fix at £811, 3 year £814 and 5 year £823.
This is leading us to think the 5 year fix might be more worthwhile. Does anyone think a lower LTV in a couple of years would really give us a better rate or would we be better to just fix for 5 and hope.

worried_jim

I am one year into a seven year fix and am happy with the piece of mind knowing what I am paying gives me. I'll have about 4 years left on the mortgage when the fix ends.

PerfectMess

I wish we would be 4 years to end of term but we’re currently at 31 years. Hoping to overpay small now and then bigger once major works are out the way. This might be another reason for taking a 2 year fix as from price comparison sites a 2 year fix at under 70% LTV would be nearer £760 per month so this would give us even more room to overpay.

getmore4less

The payment is only part of the measure you need as lower rate pays off more mortgage even with a lower payment

You missed the important piece of information
The split of the mortgage and the rates for each bit

extracting wht you have provided

PerfectMess wrote: »

85% LTV
£218,000

house value £256.470+

2 year £811
3 year £814
5 year £823.
This is leading us to think the 5 year fix might be more worthwhile. Does anyone think a lower LTV in a couple of years would really give us a better rate or would we be better to just fix for 5 and hope.
......
term 31 years

if you do the numbers you can answer that question
as you don't mention that the ported bit is different term assume you are fixing all of it.

(assume some rounding(+-0.5) on monthly payment so take the nearest to 2DP
and fees are the same)
Amount left in 2,3,5 years

£218,000 2.21% £811.14 £208,000.71 £202,832.26 £192,145.00
£218.000 2.25% £814.49 £208,049.30 £202,903.65 £192,258.77
£218,000 2.33% £823.47 £208,178.04 £203,092.91 £192,560.55

That 75% LTV
£218,000 1.75% £759.70 £207,217.49 £201,683.15 £190,319.87


How much value are you putting on the house?
That 2y will get you to 81% LTV on current(approx) value.

If rates go nowhere you are going to be £400+ better off at 5years if you take the lower shorter rate and get better LTV deals

you need to crunch the number to quantify the benefit of shorter fix against the possibility of rates going up.

PerfectMess

Thank you getmoreforless (we are buying at £257000). So in terms of how much value we are adding in 2017-18 houses of a similar size which don’t need anything work (from the photos available) have been selling for £287000-305000 so we were going with the thoughts of ours being worth around £290000. That meant if we can do the work and get the mortgage to £203000 we would be at 70% LTV.

dimbo61

With all the uncertainty around Britex I would go for a 5 year deal and get the work done then overpay the mortgage each month.
Maybe 60% LTV when the fix comes to an end