Mortgage advice- commit or wait?

jonny411

Hi guys,

I’m currently in the process of buying a new build with my girlfriend. We are using HTB as the build was due to be complete in January. However the builder has now come back saying they won’t be complete until March, which will mean we are no longer eligible for the HTB scheme. 

Now my girlfriend has a default that will be 24 months old in December. We have a 20% deposit but the only mortgage available to us now is a 4.8% rate fixed for 5 years!

Do you think we are now better off waiting until next year where we will have an even better deposit and hopefully the market will get better and the default is older again?

Its head vs heart atm as we have been in the process now for nearly a year and it will be hard to pull out now. The builder has also said that we could move our reservation to a plot that is due to be released next year at some point, as it is still the house we want. 

Apologies for the long post!

Any advice would be great. 

caeler

I think only you know the answer especially if you need somewhere to live.  If you can cope with the rate and improve your LTV in the 5 years it might be worth going ahead to then hopefully get a better deal.  

jonny411

caeler said:

I think only you know the answer especially if you need somewhere to live.  If you can cope with the rate and improve your LTV in the 5 years it might be worth going ahead to then hopefully get a better deal.  

We don’t need somewhere to live, we live with her parents atm but we feel it’s the right time for us. We are torn as we don’t want to wait but I am aware that if we do we would probably get a better mortgage in a years time. 

We could afford it but we know it’s not a great rate. But on the other hand after the 5 years we would be in a good position as we’d have a good LTV and her default will be off her record. 

MovingForwards

What are the ERCs on the mortgage?

I've gone for a 5 year fix, my interest rate is higher than yours but I'm currently saving the ERCs with a view to remortgaging before the 5 years are up.

Raffi2020

Ultimately I think it depends on what sounds less risky to you, and what your priorities are. If you can afford the 4.8% for the 5 years and getting the house is really a priority for you - maybe just take the offer and accept the less than amazing terms for now, with the upshot being you'll own your house, have achieved your goal and be able to move forward.

If you want to wait and try and get more favourable terms, as the 4.8% sounds too high and getting the house ASAP is not essential, then wait it out a bit. But obviously there's no guarantee where the market will be a year from now though - you could sail through and get a mortgage at half the interest rate, or the whole market may have tightened up a bit. Don't say that to be pessimistic (I'm not in the industry so can offer zero prediction), but obviously between the pandemic and Brexit I think anything is possible.

Ultimately it's a case of balancing out the risk/reward. Taking the mortgage now means taking less favourable terms but getting your house and having that stability/certainty. If you wait, there's a good chance you could get more favourable terms in 12-18 months, but you also have to wait to move into your property and have to accept the mortgage market could change - for better or worse - in the meantime. 

It does sound like at 20%+ deposit and only the one aging default you're in a decent position though, so you have to factor that in too. There's definitely no right answer, you just have to decide what the priority is, what risk you're prepared to take and make your decision.

md258

Is 4.8% for 5 years the best option for you? It seems high to me (but maybe I'm out of touch).
If you went for a 2 year one, would the fact that you could have paid off some of the mortgage and your gf's default is older give you a lower rate overall? There's a risk there, but certainly one I'd consider.

How long are you expecting to live in that property?

emma_829

One thing I would add to this is, have you received your Authority to Exchange from Help to Buy yet? The reason I ask is because under the terms of your ATP it says the highest interest rate they will accept after the initial fixed rate is 4.8. If your fixed interest rate is 4.8, I presume it exceeds this after the 5 years? Consequently, you will need the consent from Help to Buy anyway and they may retract the equity loan if it exceeds 4.8 due to their affordability criteria. Something to consider when making your decision as they may well be another stumbling block.  

LMJ10

I know you need to reserve by December, but I thought if you were in by March 31st it was ok? 

jonny411

md258 said:

Is 4.8% for 5 years the best option for you? It seems high to me (but maybe I'm out of touch).
If you went for a 2 year one, would the fact that you could have paid off some of the mortgage and your gf's default is older give you a lower rate overall? There's a risk there, but certainly one I'd consider.

How long are you expecting to live in that property?

Our mortgage advisor says that the only product available to us at 80% LTV involves a 5 year fix at 4.8% so unfortunately a two year fix isn’t available. 

We don’t plan on moving from the home as we see it as our ‘forever home’. 

jonny411

emma_829 said:

One thing I would add to this is, have you received your Authority to Exchange from Help to Buy yet? The reason I ask is because under the terms of your ATP it says the highest interest rate they will accept after the initial fixed rate is 4.8. If your fixed interest rate is 4.8, I presume it exceeds this after the 5 years? Consequently, you will need the consent from Help to Buy anyway and they may retract the equity loan if it exceeds 4.8 due to their affordability criteria. Something to consider when making your decision as they may well be another stumbling block.  

The 4.8% mortgage won’t be used alongside the help to buy as the builders can’t get the property completed before the 28th of February deadline. 

jonny411

LMJ10 said:

I know you need to reserve by December, but I thought if you were in by March 31st it was ok? 

The build has to be completed by the 28th of February and legal completion by 31st March. Unfortunately the builder are saying that they cannot get it built and signed off by the 28th of feb so we have to look at another mortgage without the HTB.