FTB Advice

C1996

Just wanting some level headed advice, I’m probably influenced heavily by parents lol but just wanted some general thoughts on my current situation. 

I’m a FTB, I’ve found a property and wish to have a 30 year mortgage fixed for 5 years which enable my monthly payments to be around £600, which I feel he manageable for me. If I were to change this to 25 years it would be just under £700, which I don’t want. 

Now my parents feel it’s uncommon to have a mortgage for 30 years and feel like I’m stretching myself? They’ve also put the fear of God into me by mentioning the Govt has plans for mortgage interest rates to increase to 7% (which would mean my monthly repayments would double). 

Is it risky for me to continue with my house purchase or should I just suck it up and continue with what I planned to do 🫣. 

I’ve been waiting for this for a very long time but starting to feel nervous. 

Thank you 

balegdeh1

There's nothing wrong with a 30 year mortgage. In fact, a 30 year mortgage gives you more flexibility, since it will allow you to "overpay" - pay over your minimum obligation in order to reduce your term. What that means is that you can actually choose a 30 year mortgage but make payments as if it's a 25 year mortgage! The benefit of that is that if you then have money issues, you always have the flexibility to go back to the minimum 30 year payment.

The reason I share this information is because my parents were exactly the same regarding 30year mortgages, and this is the information which finally made them see sense. Of course, even if you make just the standard payments and don't overpay, 30 years is a very normal mortgage term.

As for the rise in interest rates, your mortgage lender will have done affordability checks to ensure that you would be able to pay the rate if interest rates were to rise. I wouldn't worry about it too much.

Tiglet2

Mortgage interest rates may rise, but if you are fixing for 5 years then you will at least have the comfort of knowing what your monthly mortgage direct debit will be.  Hopefully in 5 years you will be in a better position financially, i.e. higher income etc.

30 or 35 year mortgages are now quite usual for first time buyers.  As the retirement age has being raised, the length of mortgage loans are also being extended until you're 70 or 75.  In my day, 25 year loans were normal, but then women retired at 60 and men at 65. 

You can always reduce the term part way through the mortgage by either overpaying your mortgage, in regularl or lump sum contributions.   While you are in the fixed term you may only be able to contribute up to 10% of the capital outstanding without penalties (read the t&c's).  If you do manage to overpay, then you can choose whether to continue to pay £600 per month (to reduce the term) or opt for a smaller amount to be paid each month and keep the term to 30 years.

canaldumidi

How old are you? 
As above, you can always over-pay the mortgage repayments if you get a new job/pay rise etc which would reduce the 30year term to.... something less depending how much you over-pay.
But yes, the risk of interest rates rising is real and once you 5 year fix ends the repayments might jump up. But at least with a 5 year fix you know it won't change during that time.

NameUnavailable

Look at a 10 year fixed.

Sootster2021

Parents can provide brilliant advice but if you changed your mind now based on their advice you could possibly really resent them. If interest rates do go up, now might be the best possible time to fix for 5 yrs after which time interest rates could have peaked and decreased again. Of course, they could continue to increase but the bottom line is that no one knows.

I'm buying a house at the moment on 34 year mortgage and plan to overpay when possible, but honestly I have no worries about the fact it's 34 years.

Do what YOU want to do for YOU. If you know you want to buy a house then just go for it. It'll never be risk free but if you don't know, you might never have the opportunity again so if it feels right just trust your gut ☺️

Hedgepigs

Nothing wrong with taking a longer term. I've taken a longer term than I need to. I'm overpaying to the amount the monthly payment would have been on the shorter term - but I am only commited to the lower amount, so if anything happens I have a bit of wiggle room. As long as you are strict enough not to fritter away the extra, I'd take the longest term you can (before risking hitting overpayment charges)

As for future rates - well who knows. But if you take a long fix you've time to plan for that, and hopefully increase your income in that time.

lookstraightahead

How about a ten year fixed?

hazyjo

Think you're doing the right thing. The chances of you having the same mortgage in 30 years' time are prob fairly remote anyway.

Personally I'd not fix for 10 years. Never know what's round the corner, and penalties will prob be huge if you have to end it early.

boots_babe

I realise thia is at odds with the other replies. But what stuck out to me is that you said £600 per month was ok for you, but you wouldn't want to pay £700.

Straight away that indicates to me that a small amount over the £600 would be problematic for you. In which case irrespective of mortgage term, it sounds as though you are stretching yourself too much.

What would you do if energy prices keep increasing, inflation of general clothes and food keep increasing? That would very quickly coat more than £100 more per month.

Alao what happens at the end of the fixed term? It seems unlikely rates will be lower, but rather higher by then, so you need to think about whether you'd be able to afford to remortgage. 

K_S

C1996 said:

Just wanting some level headed advice, I’m probably influenced heavily by parents lol but just wanted some general thoughts on my current situation. 

I’m a FTB, I’ve found a property and wish to have a 30 year mortgage fixed for 5 years which enable my monthly payments to be around £600, which I feel he manageable for me. If I were to change this to 25 years it would be just under £700, which I don’t want. 

Now my parents feel it’s uncommon to have a mortgage for 30 years and feel like I’m stretching myself? They’ve also put the fear of God into me by mentioning the Govt has plans for mortgage interest rates to increase to 7% (which would mean my monthly repayments would double). 

Is it risky for me to continue with my house purchase or should I just suck it up and continue with what I planned to do 🫣. 

I’ve been waiting for this for a very long time but starting to feel nervous. 

Thank you 

@c1996 I'm sure your parents have your best interests in mind and are prompting you to do something they see as logical (pay off your debt as soon as you can).

However, irrespective of the length of the mortgage you take, there's nothing stopping you from paying off the mortgage early. Most lenders will allow a 10% fee-free overpayment allowance every year. Through making regular overpayments, you can achieve the same interest savings that you could if you reduced the term.
https://blog.moneysavingexpert.com/2014/10/dont-shorten-your-mortgage-term-if-you-can-overpay/

As a broker, I can assure you that 30+ year mortgages are not uncommon at all, especially for FTBs.

If you are worried about future interest rate rises, then you need to think about fixing for whatever length you feel comfortable for - starting from 5 - 7 - 10 - 15 years all the way to one fixed rate for the whole term. No one can tell you what will work out best eventually as that depends on which way future interest rates move.