Mortgage - fixed rate for a whole term

JohnBravo

Hi All,

   I am working on a mortgage with a broker.
Does it make sense to go for a fixed rate for a whole term e.g. 20 years or is it an overkill?

I was thinking about 7-10 years fixed rate but then they sent me an offer (by mistake) for 20 years all fixed.

Best regards

Snookie12cat

Not many lenders do 20yr+ fx etc, a handful are doing 10yrs now. 
You will pay a higher rate and also have very high early repayment charges if you do this. 

stek2008

JohnBravo said:

Hi All,

   I am working on a mortgage with a broker.
Does it make sense to go for a fixed rate for a whole term e.g. 20 years or is it an overkill?

I was thinking about 7-10 years fixed rate but then they sent me an offer (by mistake) for 20 years all fixed.

Best regards

If the rate isn't bad then a 20-year fix doesn't sound like an entirely bad idea to me given how the costs of everything else are surging and interest rates are creeping upwards...

I was briefly mulling over the Habito One full-term fixed mortgages at one point recently - but the eligibility criteria and rates weren't quite right to tempt me. 

dimbo61

Lots of things can and will happen over the next 20 years !
Have you got a 20 year plan ?
Do you see yourself in this property in 20+ Years.
I have moved 5 times in the past 20 years 

JohnBravo

Right so this lender must specialize in this type of mortgages then.

I can see that the rate is about 1.25% higher than I would get otherwise on e.g. 10 years fixed rate, 10 years variable rate but this is averaged across whole 20 years term so no surprise.

Thank you for highlighting the early repayment bit, makes sense. You kind of have peace of mind if the rates go up but you cannot repay earlier or they allow you for like only 2% or something per annum (I don't know). So peace of mind but little flexibility with this plan.

Would you expect the broker to give you some options? Mine seems a bit single threaded. I know that a broker ideally wants to go after a single lender - less work but what is the point then? Are the customers always fixed on what they want?

JohnBravo

dimbo61 said:

Lots of things can and will happen over the next 20 years !
Have you got a 20 year plan ?
Do you see yourself in this property in 20+ Years.
I have moved 5 times in the past 20 years 

Yes, I can see myself at this property for another 5+ years definitely, but 20 years unlikely so you are right.

I think it's better to get a lower fixed rate for e.g. first 10 years and use early repayments.

Snookie12cat

JohnBravo said:

Right so this lender must specialize in this type of mortgages then.

I can see that the rate is about 1.25% higher than I would get otherwise on e.g. 10 years fixed rate, 10 years variable rate but this is averaged across whole 20 years term so no surprise.

Thank you for highlighting the early repayment bit, makes sense. You kind of have peace of mind if the rates go up but you cannot repay earlier or they allow you for like only 2% or something per annum (I don't know). So peace of mind but little flexibility with this plan.

Would you expect the broker to give you some options? Mine seems a bit single threaded. I know that a broker ideally wants to go after a single lender - less work but what is the point then? Are the customers always fixed on what they want?

Yeah, look into it carefully, the 10yr fx I have seen recently have ERCs at 8% for the first 2yrs and then going down to 7%, 6% - you get the idea. Very Very expensive if you need to leave it in the first 5-7 years.

dimbo61

With regular overpayments you can make a huge dent in a mortgage as most allow 10% overpayment each year.
I can see why 5 year deals are so popular !
Long enough to get you from say 90% to 80/75% LTV  or from 75% down to 60% LTV
It all about the details 
PS I Love Offset Mortgages 

JohnBravo

Snookie12cat said:

JohnBravo said:

Right so this lender must specialize in this type of mortgages then.

I can see that the rate is about 1.25% higher than I would get otherwise on e.g. 10 years fixed rate, 10 years variable rate but this is averaged across whole 20 years term so no surprise.

Thank you for highlighting the early repayment bit, makes sense. You kind of have peace of mind if the rates go up but you cannot repay earlier or they allow you for like only 2% or something per annum (I don't know). So peace of mind but little flexibility with this plan.

Would you expect the broker to give you some options? Mine seems a bit single threaded. I know that a broker ideally wants to go after a single lender - less work but what is the point then? Are the customers always fixed on what they want?

Yeah, look into it carefully, the 10yr fx I have seen recently have ERCs at 8% for the first 2yrs and then going down to 7%, 6% - you get the idea. Very Very expensive if you need to leave it in the first 5-7 years.

so in your opinion 7yrs fixed is a max you would go for.

I get your point so any selling of the property within the long fixed term would inflict high costs. I don't know why the broker assumed that I will be staying at the property for 20 years when I said 5+ but 7 years yes so 7 years fixed rate mortgage should not be a problem for me but 20 years is an unreasonable assumption.

JohnBravo

stek2008 said:

JohnBravo said:

Hi All,

   I am working on a mortgage with a broker.
Does it make sense to go for a fixed rate for a whole term e.g. 20 years or is it an overkill?

I was thinking about 7-10 years fixed rate but then they sent me an offer (by mistake) for 20 years all fixed.

Best regards

If the rate isn't bad then a 20-year fix doesn't sound like an entirely bad idea to me given how the costs of everything else are surging and interest rates are creeping upwards...

I was briefly mulling over the Habito One full-term fixed mortgages at one point recently - but the eligibility criteria and rates weren't quite right to tempt me. 

right so the rate of that fixed 20 years is 3,50% which is 1,25% more what I would get on a 7 year fixed one. 75% LTV
when I checked for 5 year deals dimbo61 has mentioned in the search one building society pops up with a 1.25% fixed rate but then I would have to do it all myself risking the lender will not lend me.

Ganga

dimbo61 said:

Lots of things can and will happen over the next 20 years !
Have you got a 20 year plan ?
Do you see yourself in this property in 20+ Years.
I have moved 5 times in the past 20 years 

W e have been in this house for just over 30 years ! it can happen.