Short or long fix mortgage

hero9989

Me and my partner are in the process of purchasing a house together. We've been to a financial advisor to find us a mortgage and they've advised two products from Accord.

• 2 year fixed rate product £495 product fee (which you can either pay upfront or add to the loan)  2.92% mortgage payment £1105.43 with £500 cashback.
• 5 year fixed rate product £495 product fee (which you can either pay upfront or add to the loan)  2.90% mortgage payment £1104.68 no cashback.

The house needs a lot of work, we will be completely renovating it and adding a lot of value to the house. We have the money to do all of the work but really not sure which would be best. 

2 year fix - will we come out of the fix in the middle of a recession and end up paying high interest rates when we come out of it? Will the house be valued much lower than we bought it for so when we come to remortgage we can't get a new mortgage and have to stick with SVR? (or worse - both!)? Lots of rumours of all of this in the very near future. 5 year fix - all of the money we put into the house will increase the value of the house but will be locked away for 5 years and won't give any financial benefit.

We do plan on staying at this house for at least 5 years. Me being me - I'm just worried about what happens at the end of the fix! Any advice appreciated!

K_S

@hero9989 No specific advice to give but from a lender valuation point of view, it's important to make the distinction between adding living space to the property (eg: rear/side extension, loft extension, etc.) and updating the property (new kitchen, bathroom, flooring, etc) or converting space (eg: garage conversion).

As far as a lender valuation is concerned, the former is much more likely to materially add value than the latter. I hope that makes sense.

WeekendWalk

Considering those deals are almost identical, other than the cashback, have you shopped around for other deals? 

I used L&C, all done by phone and really easy - might be a good shout to get a feel for what else is out there? 

getmore4less

if you believe rates are going up then the 5y will probably work out cheaper long term.

What LTV now and what LTV do you think you can achieve in 2years(TAKE note of what K_S says)
 
What are the rates for that better LTV now

once you get to 75% the margin getting to 60% can be swallowed by a small rate rise.

you may be better putting more down get the better rate now and take a bit longer over the renovations