5 or 10 year fixed term?

Mark_Lion

Which should I choose?

Nationwide offer me
5 years at 1.89% if I pay £999 fee.

5 years at 2.09% no fee.

10 years at 2.69% if I pay £999 fee.

10 years at 2.79% no fee.

pinknsparkly

Use this MSE mortgage calculator to compare the fee vs no fee options:
https://www.moneysavingexpert.com/mortgages/compare-mortgage-rates/


Whether it is cheaper for you to opt for the fee or fee-free mortgage is dependent on how large your mortgage is. The larger your mortgage, the more likely you are to save money by opting for the lower interest mortgage that charges a fee. For smaller mortgages, the higher interest, fee-free option is likely to be cheaper.


As for 5 year vs 10 year - this is more a matter of personal choice. Are you committed to staying put for 10 years, or are you likely to want to move between 5 and 10 years after buying? If you're likely to want to buy then you'll probably be better on the 5 year mortgage to avoid paying the early repayment charge. On the other hand, interest rates are historically very low, and so if you are committed to staying in the house for at least 10 years and want the protection of guaranteed mortgage repayments over that time period then the 10 year option makes more sense. For example, if you think that in 5 years time you are likely to have children with a subsequent drop in income/increase in expenditure as you either reduce your work hours, or pay for childcare then paying the additional interest now in order to make sure it doesn't increase for a decade may be worthwhile.


For what it's worth, we intended to go for a 10 year fix for the childcare issues I mentioned above (to avoid having to remortgage to a potentially higher interest rate at what will hopefully to be the most expensive time in our lives!), with a 1% ERC between years 5 and 10 but weren't eligible for it in the end (they wouldn't mortgage our property) so we have a 5 year fix instead.

anselld

Need to know the size of the mortgage to assess the fee option, but I would go for 5 year personally.

getmore4less

Need to know size of mortgage and full term or planned payment if overpayments.

Min mortgage for fee is(interest only) break even

5yfix.(999/5)/0.003
10yfix (999/10)/0.001
Bigger payment the size needed goes up

What LTV and lender.

Mark_Lion

Thanks for the replies.

Amount owing on the mortgage is £57,843.70
Mortgage is with Nationwide.
I have 15 years remaining to pay.
Do not have plans to sell within 10 years.

LTV? Is that asking house value?
One year ago, house valuation is £280000.

dimbo61

Well Mark why not use " what's the cost " website and put in all your details.
This will give your mortgage cost each month for the different deals on offer.
Then click on the " details" part and see how much you would owe after 5 years so July 2024 or 10 years July 2029 to work out which is the best deal.
I think the Fee free one will work out cheapest due to the size of your mortgage.

getmore4less

You can't recover the fee with that size of mortgage.

If looking at 10 year check out other lenders especially Coventry that have a good ERC profile on 50%ltv 10y fixes(0% after 5y)

pinkteapot

We're also getting a small mortgage (£80k) and it wasn't worth paying fees to get a lower rate (we added the fee spread over 60/120 months to the repayments and we'd be worse off). As others have said, use a calculator to work out the total cost over the 5 or 10 years.

LTV = loan to value = loan value as a percentage of property value. You're looking at roughly a 21% LTV which is really low (a good thing). Do check other lenders as you should be able to get a better rate than Nationwide are offering. We're getting a 5-year fix at 1.99% (0.1% cheaper than yours) from HSBC. It'll depend on your circumstances (employment status, other debts, etc.) though as some lenders are fussier than others.

If you're not confident looking into mortgages yourself then use a broker - they'll talk you through your options, find the best deal for your circumstances, and do the application on your behalf.

Zola.

5 year for sure, with overpayments optional etc. You could get it knocked out in 5 years maybe!

getmore4less

pinkteapot wrote: »

We're also getting a small mortgage (£80k) and it wasn't worth paying fees to get a lower rate (we added the fee spread over 60/120 months to the repayments and we'd be worse off). As others have said, use a calculator to work out the total cost over the 5 or 10 years.

LTV = loan to value = loan value as a percentage of property value. You're looking at roughly a 21% LTV which is really low (a good thing). Do check other lenders as you should be able to get a better rate than Nationwide are offering. We're getting a 5-year fix at 1.99% (0.1% cheaper than yours) from HSBC. It'll depend on your circumstances (employment status, other debts, etc.) though as some lenders are fussier than others.

If you're not confident looking into mortgages yourself then use a broker - they'll talk you through your options, find the best deal for your circumstances, and do the application on your behalf.

You can't just use the difference in payments to work out if is worth paying the fee.

Mark_Lion

Looking at the calculation site, no fee is the choice.

I was thinking of getting the 10 year deal, but now leaning towards the 5 year deal, and making overpayments.

Wish it was possible, but no one can know the interest rates in 5 years.
Interest rates have remained lower than I expected since I started the mortgage, so I hope Brexit will have settled down by 2024 and interest rates will remain low.

LOL...Zola "pay it off in 5 years" :rotfl:
I work for NHS and was almost made redundant this year. Their trial of alternative plan failed, so safe for the moment, but can never be certain.

Thanks for all the replies. I have until the end of October to decide. Can start it on the first of each month before that, so will start new deal on 1st September.