Mortgage advice does this sound sensible?

getmore4less

howzat92 said:

getmore4less said:

Looking at the rates table(.4 Feb 2021)
3.44% isthe 2year rate
3.66% is the 5y rate

amount	rate	payment	owing
£221,000.00	3.44%	£905.71	£214,247.91

 2 years would  still 87.5% LTV would need some HPI or overpayment to get to 85%(£208,250)

amount	rate	payment	owing
£221,000.00	3.44%	£1,145.00	£208,311.49

Do you think you could sustain an overpayment of £240pm?

with a 5 year plan at that rate.

amount	rate	payment	owing
£221,000.00	3.44%	£905.71	£203,208.85

You are getting into 83% territory

with the 2 year rate you  have  3 bites at the reduced rate cherry.
90% rates drop
you can overpay to get to 85%
HPI get you to 85%

One for the brokers is what retention rates are Halifax doing for 90%+
worst case is the SVR currently 3.59% not much difference to the 90% rates anyway.

With no change in value and paying £1kpm you hit 85% around 2y10m-3y with a 3.4%-3.6% interest range
sooner if you can overpay a bit more.

This is useful thankyou. No way I would be able to make a £240 overpayment I'm afraid. 

How risky do you think it is going with the 2 year 3.44% deal? It sounds like you think that would be the better one? 

I would need more information before deciding but I can do a number crunch.

 Many say things like longer fixes are the safer option but don't assess the relative risks and can lock you into paying more when the downside risks when rates go up is not that big

 Things to consider are rates going to move overall?
The general rates are pretty much as low as they can get there is not a lot of room for them to move down further.

However as has been pointed out 90% &  85% are currently at a premium so have room to move down again.

 Rates going up I can't see that as we need to stimulate the economy.
 So what happens if you take the 5 years ,  we can look at the 2+ option.
Add the fee and make it a £1k payment for convenience(will be £918 anyway)
5 year fix in 5 years  that the benchmark for how much you owe with other options

amount	rate	payment	owing
£221,999.00	3.50%	£1,000.00	£198,922.00

first option is rates don't do anything and you are on the 3.44% for 2 years 

amount	rate	payment	owing
£221,000.00	3.44%	£1,000.00	£211,908.66

and then the 3.59% SVR for 3 

amount	rate	payment	owing
£211,909.00	3.59%	£1,000.00	£198,017.73

That could save you £900    or the rate could go up to  3.73% and break even.
if they had gone up 0.5%

amount	rate	payment	owing
£211,909.00	4.09%	£1,000.00	£201,290.15

~£2,600 more if no better options but you should hit 85% to bring that down

If you don't lose value(one of the unknowns as we don't know the property)
Then if 90% rates drop a bit you save more.

if you hang on for another year on the SVR(not changed) to get to 85%

amount	rate	payment	owing
£211,909.00	3.59%	£1,000.00	£207,443.53

then get an 85% 2 year deal lets say 3% as they don't show their retention deals.

amount	rate	payment	owing
£207,444.00	3.00%	£1,000.00	£195,552.31

Potential up side looks quite good over £3k and creeps you into 80% something the 5 year would need overpayment to do.

Another number is the rates going up protection
With a 1k payment at end of 2y fix you can cover a rate of 4.28% over the 33 years left.

The trick with this purchase is going to be getting that  LTV down  ASAP.

if the property is OK and has potential then the downside there should protect you and you should get at least 1 step within 3 years and 2 within 5years,  taking the 5y fix loses those options.