First mortgage

superbez · 17 July 2017 at 2:56AM

Hi

Finally in a position to buy our first home, we have the deposit, are now debt free and have a mortgage agreed in principle. I am interested to hear what people suggest we go for as total novices? I like the idea of a fixed mortgage as I am keen on knowing what I will pay regardless of what happens to the markets. With Brexit around the corner we had kind of settled on a 5 year fixed for security but the mortgage advisors we have spoken too both suggested 2 year fixed which is what the AIP is based on. I really have no idea on what I should be doing which is a little scary seeing as we are about to commit to the biggest financial outlay of our entire lives.

Any advice would be very much welcomed!

Many thanks

juniordoc · 17 July 2017 at 10:10AM

In trying to make this decision you are basically trying to decide how interest rates are going to change in the next 2-5 years.
It's a gamble, and no'one can give you any certainty.
Personally, I think that all the brexit uncertainty and poor economic performance in the UK will put downwards pressure on interest rates keeping them low.
Therefore in my opinion, it's not worth paying a higher mortgage rate to fix your payments for 5 years, when (in my opinion) I don't think interest rates will be much higher in 2 years time anyway.
So if I were you, i'd go for the 2 year fix, and try and raise as big a deposit as you can to protect against negative equity if prices fall.
Now is a very risky time to buy with only a 5 or 10% deposit. Remember that's just my opinion, good luck with whatever you decide!

DumbMuscle · 17 July 2017 at 10:20AM

Interest rates are unlikely to go significantly lower than they are now. What are the fees on the 2 year fix, and how much are you borrowing? When I looked at it (borrowing £150k), it was about the same to go for the 5 year fix than it would be to get two 2 year fixes, since what I was saving in interest would have been cancelled out by the fees.

Are you likely to have any major financial changes in the next 5 years? (e.g. promotions, maternity leave). Work out what effect those would have on the mortgage deals you could get - this may make a difference to when you want to remortgage

hazyjo · 17 July 2017 at 10:55AM

I've decided on a 3 year fix. Two years go past very quickly and it may well clash with any Brexit plans, 5 years seems long to me (I've often moved within that time), and 3 years (this time round) seemed about right. I've usually gone for 2 years.

Jx

superbez · 18 July 2017 at 4:49PM

juniordoc wrote: »

In trying to make this decision you are basically trying to decide how interest rates are going to change in the next 2-5 years.
It's a gamble, and no'one can give you any certainty.
Personally, I think that all the brexit uncertainty and poor economic performance in the UK will put downwards pressure on interest rates keeping them low.
Therefore in my opinion, it's not worth paying a higher mortgage rate to fix your payments for 5 years, when (in my opinion) I don't think interest rates will be much higher in 2 years time anyway.
So if I were you, i'd go for the 2 year fix, and try and raise as big a deposit as you can to protect against negative equity if prices fall.
Now is a very risky time to buy with only a 5 or 10% deposit. Remember that's just my opinion, good luck with whatever you decide!

We are fortunate enough to have large deposit which has come from the inheritance of a property. Long story short, we live in the south east, the property we are looking at is £350k and we have deposit of £180k.

I really do appreciate everyone's responses to my question, thanks!

superbez · 18 July 2017 at 4:53PM

DumbMuscle wrote: »

Interest rates are unlikely to go significantly lower than they are now. What are the fees on the 2 year fix, and how much are you borrowing? When I looked at it (borrowing £150k), it was about the same to go for the 5 year fix than it would be to get two 2 year fixes, since what I was saving in interest would have been cancelled out by the fees.

Are you likely to have any major financial changes in the next 5 years? (e.g. promotions, maternity leave). Work out what effect those would have on the mortgage deals you could get - this may make a difference to when you want to remortgage

See above for borrowing, also have a little left over to hopefully do a single story extension which would be completed if I went for a 2 year fix so when it came to remortgaging I would hope that the extension would add value to the property.

superbez · 18 July 2017 at 4:54PM

hazyjo wrote: »

I've decided on a 3 year fix. Two years go past very quickly and it may well clash with any Brexit plans, 5 years seems long to me (I've often moved within that time), and 3 years (this time round) seemed about right. I've usually gone for 2 years.

Jx

Interesting, I hadn't thought of 3 years, I may well look into that!

Many thanks.

DumbMuscle · 18 July 2017 at 4:59PM

superbez wrote: »

See above for borrowing, also have a little left over to hopefully do a single story extension which would be completed if I went for a 2 year fix so when it came to remortgaging I would hope that the extension would add value to the property.

You're already at around 50% LTV, so adding more value to the property is not going to make a significant difference to your rate (anything below 60% will get the best deals)

hazyjo · 18 July 2017 at 5:26PM

YBS have always been a very good option for me. Worth checking out their 3 year fixed rate cashback deal. Of course, you may find better, but they sometimes get forgotten.

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