Should I fix for 2 years or 5 years?

efirox

Hi all, we finally had an offer accepted and we're looking to get our mortgage sorted, we are FTBs.

There are two offers we're considering:
- 1.64% over 2 years with Santander plus £999 product fees but with free evaluation and £250 cashback, this is about £804 for us
- 2.18% over 5 years with Barclays plus £999 product fees with free evaluation, this is about £873. The problem with this is our broker says the affordability is slightly lower than what we want, so we can try to push using my sales bonus or I think we could just push £2k from our savings

It is 90% LTV £285k

Any thoughts or advise?

Thanks 

TheJP

How long do you see yourself in this property? Personally i would probably go for the 2 year and then see how i feel about the property, after that im sure rates may have levelled or at least you'll get similar to the 5 year, At least you'll have 2 years equity in the property.

efirox

That's a good point really, the penalty fee for the 5 year one is not small and I wouldn't want to pay if we don't like the property!

eddddy

efirox said:

That's a good point really, the penalty fee for the 5 year one is not small and I wouldn't want to pay if we don't like the property!

I believe that Barclays mortgages are portable - so you'd just transfer it to your next house, with no early redemption penalty.


But the costs of selling and buying and moving are pretty huge - not to mention the stress and hassle. I'm not sure that it's sensible to approach buying a property with the mindset that if you don't like the one you buy, you can move again in a couple of years.  You probably have to think of it as a longer term commitment.

steampowered

The 5 year fix sounds like a good deal to me, if you are reasonably sure you'll be in the property for 5 years.

You could take the 2 year fix and try to move onto a 85% LTV product in 2 years time. A few years of increasing house prices, mortgage repayments and additional savings might just get you there. Though Santander are only offering 1.49% for 85% LTV mortgages at the minute so it's not a huge saving. 

efirox

Thanks all, we decided to with the 2 year option in the end as the rate is ending tonight.

The way the market is, it's about what we can buy, not what we want to buy unfortunately  

The payments will be what we're paying for rent so our lives won't really change, which is the good thing!

HotPantsCruiser

efirox said:

Thanks all, we decided to with the 2 year option in the end as the rate is ending tonight.

The way the market is, it's about what we can buy, not what we want to buy unfortunately  

The payments will be what we're paying for rent so our lives won't really change, which is the good thing!

What happens if the payments rise after two years?

efirox

HotPantsCruiser said:

efirox said:

Thanks all, we decided to with the 2 year option in the end as the rate is ending tonight.

The way the market is, it's about what we can buy, not what we want to buy unfortunately  

The payments will be what we're paying for rent so our lives won't really change, which is the good thing!

What happens if the payments rise after two years?

We're fine, unless the rate goes to 15% or higher, in which case it would get tough

RelievedSheff

HotPantsCruiser said:

efirox said:

Thanks all, we decided to with the 2 year option in the end as the rate is ending tonight.

The way the market is, it's about what we can buy, not what we want to buy unfortunately  

The payments will be what we're paying for rent so our lives won't really change, which is the good thing!

What happens if the payments rise after two years?

You pay more.

Much the same as you pay more when your rent rises.

theartfullodger

We can tell you in 5 years time which was wiser.  ANY other answer is just guesswork.

In November 1979 under Thatcher my (for then) large mortgage increased in cost as BoE interest rates hit 17%.  My building society was kind as they only required 15% until rates dropped later.

Painful: It happens. 

HotPantsCruiser

RelievedSheff said:

HotPantsCruiser said:

efirox said:

Thanks all, we decided to with the 2 year option in the end as the rate is ending tonight.

The way the market is, it's about what we can buy, not what we want to buy unfortunately  

The payments will be what we're paying for rent so our lives won't really change, which is the good thing!

What happens if the payments rise after two years?

You pay more.

Much the same as you pay more when your rent rises.

Yes but you can walk away from a rental quite easily and find a cheaper one, you can`t really do that with a mortgage debt if interest rates rise, which is why I thought the longer fix might be better?