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  • FIRST POST
    • kbcs6dpm
    • By kbcs6dpm 7th Aug 18, 10:54 AM
    • 23Posts
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    kbcs6dpm
    1st time buyer 10yr fixed rate 10yr length. Crazy?
    • #1
    • 7th Aug 18, 10:54 AM
    1st time buyer 10yr fixed rate 10yr length. Crazy? 7th Aug 18 at 10:54 AM
    Hi all,

    Wanted some advice on what you think about my current situation.

    I'm a 40 year old married first time buyer (wife not working), currently living with my parent's. I'm looking to buy a house worth no more than 400k. I have 275k savings and am thinking of using 240k of that as a deposit, so 35k remaining for stamp duty, fees etc, plus a bit left for emergencies.

    Looking at mortgages, if i were to borrow 160k on a 10 year fixed rate deal with a 10 year term i would be repaying about 1,500 per month. I earn just under 3,000 per month after tax. So in 10 years i would have paid off my mortage with a guaranteed monthly payment.

    I'd need to buy some furnishings, such as sofa, dining table, wardrobes. The only think i'd be taking from home would be the bed, clothes and toiletries.

    Does the scenario above sound smart or foolish to you? There's no reason why i couldn't extend the mortgage terms to 20 or 25 years (paying about 850 a month for 20 years instead of 1,500 for 10). But the idea of paying off the mortgage in just 10 years, with the certainty of how much i would pay a month, sounds quite attractive to me. What am i missing?
Page 1
    • ACG
    • By ACG 7th Aug 18, 11:01 AM
    • 17,978 Posts
    • 9,767 Thanks
    ACG
    • #2
    • 7th Aug 18, 11:01 AM
    • #2
    • 7th Aug 18, 11:01 AM
    Your stamp duty liability as a first time buyer will be around 5k on a 400k purchase price.

    There is no issue taking out a 10 year mortgage as such, you will probably be paying over the odds as there are not many 10 year fixes available and the rates will be higher than a 5 year fix. But I suppose what you are losing with a more expensive 10 year fix you are potentially saving by taking out say a 5 year fix and rates rising in the interim.

    The only other potential issue is that in a 10 year fix, if your circumstances change, you are tied in with hefty charges to get out of the deal.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • NelliePie
    • By NelliePie 7th Aug 18, 11:57 AM
    • 267 Posts
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    NelliePie
    • #3
    • 7th Aug 18, 11:57 AM
    • #3
    • 7th Aug 18, 11:57 AM
    I'd research how much bills in your area and for the size house are going to cost (council tax, utilities, insurance, phone etc) then see how much you have left over for food and disposable. It might be worth going for th 20 years and overpaying to total to the 1500 (if your mortgage terms allow) that way you can still pay it off in ten years but if something happens and your minimum payment is only 850 rather than 1500 so you're less likely to miss a payment. I hope that makes sense!
    Little One's due date 18/12/18
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    • kerri gt
    • By kerri gt 7th Aug 18, 12:11 PM
    • 7,621 Posts
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    kerri gt
    • #4
    • 7th Aug 18, 12:11 PM
    • #4
    • 7th Aug 18, 12:11 PM
    I'd research how much bills in your area and for the size house are going to cost (council tax, utilities, insurance, phone etc) then see how much you have left over for food and disposable. It might be worth going for th 20 years and overpaying to total to the 1500 (if your mortgage terms allow) that way you can still pay it off in ten years but if something happens and your minimum payment is only 850 rather than 1500 so you're less likely to miss a payment. I hope that makes sense!
    Originally posted by NelliePie
    ^^ This

    Circumstances can change a lot in 10yrs, 50% of your current salary before bills / food / general living costs is a lot to be committed to fro 10yrs.
    Feb 2015 NSD Challenge 8/12
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    • getmore4less
    • By getmore4less 7th Aug 18, 2:20 PM
    • 33,653 Posts
    • 20,365 Thanks
    getmore4less
    • #5
    • 7th Aug 18, 2:20 PM
    • #5
    • 7th Aug 18, 2:20 PM
    I would look at borrowing to your limit keeping LTV below 60% for best rates.

    Longer term to give more flexibility on payment.

    Shorter fixed term to get interest rate down(more of the money pays off capital)

    You retain cash reserves to adjust once settled into the home.

    Committing to 1500pm gives very little room to adjust payment down if needed as that is usually when you can't extend full term.

    Much easier to shorten full term with overpayment.
    • kbcs6dpm
    • By kbcs6dpm 8th Aug 18, 9:30 AM
    • 23 Posts
    • 2 Thanks
    kbcs6dpm
    • #6
    • 8th Aug 18, 9:30 AM
    • #6
    • 8th Aug 18, 9:30 AM
    Thanks all - some very good points that i didn't think about. I think a mortgage term of 20-25 years is more sensible for me.
    • sparkey1
    • By sparkey1 8th Aug 18, 11:12 PM
    • 439 Posts
    • 193 Thanks
    sparkey1
    • #7
    • 8th Aug 18, 11:12 PM
    • #7
    • 8th Aug 18, 11:12 PM
    Cant help feeling you will be paying over the odds for a 10 year fixed.


    Is it because you want it fixed, or because you want to repay in 10 years.


    If you want to repay in ten years, choose a mortgage with a lower rate of interest, but make overpayments. Most mortgages allow you to pay 10% of the capital each year.



    You could try a strategy of repaying the same amount each month as the 10 year fixed.
    • kbcs6dpm
    • By kbcs6dpm 9th Aug 18, 10:10 AM
    • 23 Posts
    • 2 Thanks
    kbcs6dpm
    • #8
    • 9th Aug 18, 10:10 AM
    • #8
    • 9th Aug 18, 10:10 AM
    Cant help feeling you will be paying over the odds for a 10 year fixed.

    Is it because you want it fixed, or because you want to repay in 10 years.
    Originally posted by sparkey1
    I've scrapped the notion of paying off a mortgage in a 10 year period. Will go for 20-25 instead. I like the idea of paying the same monthly amount for the next decade. Plus, interest rates are so low at the moment they can only rise.
    • Lizbragg33
    • By Lizbragg33 9th Aug 18, 10:22 AM
    • 27 Posts
    • 18 Thanks
    Lizbragg33
    • #9
    • 9th Aug 18, 10:22 AM
    • #9
    • 9th Aug 18, 10:22 AM
    I strongly recommend you take a longer term as suggested. Myself and my husband take home 4600 a month and our mortgage is 1500 a month with council tax and bills taking this to 2000 a month. We took a smaller mortgage term 16 years. I honestly don't think its doable earning 3k.
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