10 year fixed rate mortgage advice

loubylou69

I'm considering remortgaging for a 10 year fixed period.

I'm 51 and looking to retire in 10/11 years. My current 5 yr fixed rate finishes with Virgin at the end of April. (I've overpaid by roughly £36 a month to make my monthly payments £600.) it has 15 years left so I'm looking to reduce the term to tie in with my retirement in 2029.

My job as a teacher is stable and I don't plan to move house until after I retire. I need the repayments to be roughly £700 a month to be affordable, I could maybe stretch slightly higher.

I've found 2 fixed rate deals for 10 years (if I add an extra year it does bring the monthly cost down considerably)

Virgin 10 year fixed at 2.54% no fees £729 (term 11 yrs)
Santander 10 year fixed at 2.29% no fees £729 (term 11 years)

I could overpay at times plus my lump sum when I retire could pay off any outstanding mortgage.

Is this do able do you think?

ACG

If you deem it to be affordable and the lender does then yes.
However, you will likely be paying a premium for the 10 year fix. There are not many lenders out there who offer them so the rates are going to be higher as there is not much competition.

Have you considered 2 x 5 year fixes? The rates now will be lower, obviously nobody knows what will be around in 5 years but if you upped your repayments to £700 a month on a 5 year fix, your balance would probably be lower in 5 years time on a 5 year deal than it would on a 10 year (if that makes sense?).

It is probably worth sitting and doing some figures.

getmore4less

Do Coventry still have a 10y fix, ERC free after 5years.

Why are the two you have identified the same £pm when the rates are different?

loubylou69

Thanks for your input guys.

I'm not sure why they are both the same amount. I used moneysupermarket to do my search. I think one is slightly rounded up as it's different when you go to both providers websites by a couple of £

I'm currently with Virgin and would stick with them if the deal was good. Just easier I suppose. I bank with Santander and my mortgage before this one was with them also.

5 year fixed rate (but reducing the term to 10 yrs) gives
Virgin 1.75% £700 no fees
Santander 1.74% £700 no fees

The cheapest is First Direct 1.64% £696 no fees

getmore4less

You can't compare properly using just the amount per month.

You also have to compare to the fee paying options.

Moneyminded

I know you intend to retire in 10 years however you said you need the payments to be about £700 per month to be affordable. Could you look at a 14 year term with a view to paying it off earlier? The monthly payments would be more affordable and you could look to make over payments during the 10 year fix. Alternatively you could save any additional monies to one side during the 10 year period and pay it off at the end of the fixed term.

loubylou69

I have thought about overpaying etc.

So much to think about.

I suppose I just like the idea of it gone, paid every month with no temptation to dip into a savings account. Saving rates are so rubbish too.

With Brexit now looming I am quite worried about interest rates going up.

Thrugelmir

Switching lenders will incur additional costs. Something which needs to be factored in when comparing products.

getmore4less

Virgin 10 year fixed at 2.54% no fees £729 (term 11 yrs)
Santander 10 year fixed at 2.29% no fees £729 (term 11 years)

For 11y term

£83,880.00 2.54% £729.02
£83,880.00 2.29% £719.45
or
£85,000.00 2.54% £738.76
£85,000.00 2.29% £729.06

There should be a difference of around £10pm with those.

5 year fixed rate (but reducing the term to 10 yrs) gives
Virgin 1.75% £700 no fees
Santander 1.74% £700 no fees
First Direct 1.64% £696 no fees

Those also don't look right for a 10y term as they don't match the borrowing above.
£85,000.00 1.75% £772.63
£85,000.00 1.74% £772.26
£85,000.00 1.64% £768.49
or
£77,000.00 1.75% £699.92
£77,000.00 1.74% £699.57
£77,000.00 1.64% £696.16

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How much are you borrowing, what's the place worth(LTV)

Also check what they mean by 10 years some products are actually longer on the current cycle as they have end dates rather than 10y

eg.Santander current product range will be 10y 3month(end 2 April 2030)

Also check the ERC profile.
eg. IT looks like Santander may be 6% for the full term
Most have a sliding scale, with Coventry ERC free after 5y if you qualify.

loubylou69

My house is worth £200,000 and when my mortgage deal ends in April I'll owe roughly £84k

As above a 10 yr fixed rate puts many deals to way over £700 a month. But an 11 year term makes it more affordable.

The virgin mortgages seem to have a sliding scale regrading ERC.

getmore4less

OK less than 50% gives you access to the Coventry deal that is a 10y fix ERC free at 5y 2.2% £999fee

after 10 years with full term
10y £85,000 2.20% £790pm £0
11y £85,000 2.20% £726pm £8,604
12y £85,000 2.20% £672pm £15,768