So it looks like I’ll be going for a mortgage in a few months with just over a 90% ltv… I’m a first time buyer and I’ve got a few meetings booked in with banks and building societies to try and get an approval so I get a better idea of if its going to be a “yes” before the big day… however I’ve been looking all over and finding it a real chore to decide what mortgages offer the best value.

I’ve got a gut feeling that I should only go with a 2 year fixed or 5 year fixed or low rate type mortgage and then be looking to jump ship as soon as that period ends..

Does anyone have any advice on what they did or what they’d do differently?

I’m in a pretty comfortable position so I’ve worked out that if interest rates went up to 7% ish I’d still be able to pay the mortgage but I more importantly dont want to get shafted by a load of interest if I dont have to and plan on over paying it heavily in the next 10 years.

Cheers 🙂

If you are comfortable position consider an offset mortgage as if you have savings it could pay dividends. Wish I had done mine sooner

Get a broker on the case. They should be able to get you a better deal than the High Street banks.

If you plan on overpaying, then I would say fix it for only 2 years, then hopefully when it comes time to renew you will be looking at the 85% LTV or 80% LTV depending on how much you overpay and how much prices move. You will get a much better rate once you reach these milestones on the LTV scale.

That’s what we have done, just have to hope rates do not go up in the interim

We were in the same place two years ago and used a broker (where are you – I know a good one in Rickmansworth / Chesham area).

He was able to access some deals that weren’t available on the high street which got us a good safe First Time Buyer – we were 89.9% LTV – if you can get below 90% the banks like it more – even a tiny bit.

Two years on, due to the house price increase we are remortgaging at less than 70% – didn’t expect it in our wildest dreams but house price just outside London has shot up! We used the same broker as we had built a relationship and about to remortgage on a 5 year contract. Why 5 – if the interest rates do shoot up in the next two or three years, they won’t be coming down that quickly and 5 years will get us through hopefully the worst of it. We will be paying about £70 more a month but have the assurance of a fixed amount going out for 5 years…

We are going to overpay as much as possible as well (we planned on doing that in the first two years but it never happened) but remember you will need money for doing the property up. We are about to do a new boiler and kitchen so remember to save for things like that.

7% could be anything up to £700 so be aware.

Thanks for the advice guys – I don’t think an offset would sit too well.. maybe.. but I don’t plan of having much “cash” sat in my bank as the majority of it I reinvest in my business and the rest wont build up fast enough to sit effectively as an offset I don’t think.

I think wise words on keeping some cash to do the place up – luckily its only 10 years old and fairly neutral so there shouldn’t be much needed or anything super unexpected.

I dont think the value of the property will go up much in the next 5 years really.. but I could be proved wrong. Things seem to have slowed down up here in the North and the prices have been settled in the town im buying for the last couple.

My mate actually lives in the identical house next door so I know quite a bit about it.

How do I look for mortgage brokers ? I get put off by that word… not sure why but I associate them with estate agent type characters?

Thanks!

Sorry forgot to say… do you think taking a 2 year fix out now could drop me in the shit right in the middle of rate increases ect? Is it wiser to go for the worser fixed rate now and secure 5 years to get my foot in the door ?

Rates have been going up early next year for the last few years so I don’t think anyone really knows if/when they will eventually go up.

Speak to London and Country.

I used them for my last mortgage (18 months ago) and they were first class. Two friends have also completed on purchases within the last 6 months.

Free advice. Nothing to lose. No need to take out any of their additional services, ie instead use word of mouth to get a solicitor etc … speaking of which, I can recommend one of those too.

Simples.

From my online searching London and Country have come out tops actually! I’ll chase them up on that – thanks for the prod!

Thanks John.. I know its all a bit of a guess and snake oil.. just trying to work out which is the more sensible of the guesses now

Mortgage rates are a lottery
Ive been in the game for 15y and have won some and lost some when it comes to tarting

Having said that Im fairly sure (not an expert) that things are only going one way from 2016 and so my next fix will absolutely be for 5y not the usual 2

COI: I have got it massively wrong before, and also pretty well right 🙂

Good luck!

mortgage rates can only go in 1 direction at the moment. Those who are planning the 2, 5, etc fixed mortgages know this and as we get closer and closer to rates going up the 5 year deals will be getting less attractive as they probably want you on a 2 year to get you onto the higher rates that are coming sooner.

Do the calcs of the 2yr with a moderate rate increase vs the 5 yr over the next 5 years and see how they compare. It sounds like you will be pretty comfortable at the current 5yr rates so maybe just enjoy the next 5yrs of fixed outgoings and if you have have any spare then an offset mortgage or overpayment.

But make sure you have enough disposable to enjoy yourself, don’t throw every penny into your mortgage. Which is were offset mortgages to have benefits provided the rate is decent.

mortgage rates can only go in 1 direction at the moment

Not so. Rates could go up. Rates could stay the same. Rates could even, believe it or not, go down.

Those who think rates could not go down are talking about bank of england rates. Ignoring the fact that even that could go down, there is plenty of scope for real world rates to go down. Especially in the longer term lock-ins, ie 5yrs, and the high LTV sector.

Also, by all means, consult a mortgage broker. They often come up with great deals. But in my experience, getting my last two mortgages, and my GF’s last 2, I found better by (admittedly hours and hours or) trawling the net.

When we first bought our house we did a 2 yr fixed deal. I was amazed at how little of the capital we’d paid off by the end and while our mortgage advisor was looking to get me to take another I looked around myself – very much like you are.

I wanted to overpay and save up to do the work on the house that needed doing and, on doing all the sums, an offset was easily the most cost effective as long as rates didn’t head skywards within a few months. 6 years later we are 2 years away from paying the mortgage off.

The offset saves us about £2k in interest payments a year as both our current accounts are linked to it, as well as the savings acct (with overpayments, doing up money and other savings)

With a fixed rate you are limited in how/when you can overpay, with an offset you’re always overpaying with all the money in your current acct.

I don’t think an offset would sit too well.. maybe.. but I don’t plan of having much “cash” sat in my bank

Do the sums and work it out, I had a similar view until I saw the break even point of low interest rates and offset effect.

Firstly, have you got one of the new help to buy ISAs ? If not and you aren’t buying for a few months, get one and max it out. You’ll get a few hundred extra £££ for the purchase. Halifax BS are currently the best.
As has been said, it really is a lottery and the people in the know have banged on about the rates going up ‘soon’. I’d go for a 5 yr fix but definately get more than a 10% deposit, even if means selling a kidney or blagging a few quid from family (if able)
A quick look shows that a 10.5% deposit will get you a 3.19% 5yr rate, a 9.5% will get a 3.99% rate. That’s quite a difference.

Otish

best mortgage thing I ever did was spareroom Mon-Fri lodger ….

as a new buyer be careful who you go with to buy. some mortgage cos – esp the ones that seem to be offering great deals , use in house conveyancers and drag their heels big time.

some of my friends lost houses due to HSBC who were offering the best rates to new buyers at the time – using their inhouse conveyancing

oh and **** me rates are low just now…..

10.5% got me 5.4% when i took out a mortgage 4 years ago….i fixed for 2 years… overpaying and updating (rewiring , new heating system etc) then did 18 months on the fixed rate of 4% – still overpaying….

had it revalued at nearly 40% increase and so now have 55% LTV…… so the rates plummeted.

im paying the same cash amount of interest now as i was paying off the capital when i first took out the mortgage – its mental.

the whole time through its been cheaper than renting equivalent locally….

“Do the sums and work it out, I had a similar view until I saw the break even point of low interest rates and offset effect.”

At this current time – its possible to get savings interest rates that exceed your mortgage interest rate if your not on a 90% mortgage.

A few things to think about –

Second what others have said – if the house is likely to go up in value, or you could pay down some of the debt, it will be worth remortgaging for a lower LTV.

However, if NOT then remortgaging can be time consuming and there are usually some up front costs that offset some of the savings. Mortgage brokers and even the sales people of individual mortgage co’s will always push you towards short term deals as they’ll be on some kind of commission so they want you to keep remortgaging.
2 years will roll around before you’ve even properly settled in.

Mortgage rates are a zero sum game – all the deals you’re being offered cost the bank pretty much the same amount of money. The longer term rates represent their costs of borrowing for that period (and the risk/uncertaintly over long term rates). There might be a deal that suits you for a particular reason (no money now but expect more in a few years/will be able to remortgage/have savings as well etc etc) but they all cost the bank the same amount.

If you don’t absolutely need a fixed outgoing think about a tracker deal – effectively bank rate plus their margin. You’re not gambling on future rates and neither are they so there doesn’t have to be risk premium built in. You won’t win if rates go up dramatically but you won’t lose if they stay low for much longer (which is what’s actually happened since 2008)

that is a fair point – no guarantee youll be able to remortgage in 2 years if rates rise you could quickly get into negative equity as the arse falls out the market…..

something to be aware of but not overly concerned with. Youll just default to the banks SVR – you wont find your self without a house…..

At this current time – its possible to get savings interest rates that exceed your mortgage interest rate if your not on a 90% mortgage.

This is a good point – make sure you take the tax on interest into account though – makes a big difference if you’re a high rate tax payer.
(if you’re paying 5% mortgage interest you need an acct paying above 8% interest to make it worth it as a high rate taxpayer)

I think when I worked it out they key was that all the money we had (in linked accounts) was offsetting and the best savings accounts meant locking the money up for a while.

In comparison HSBC were pretty good to deal with when I got my mortgage.

I think HSBC still offer the lifetime trackers at 90% LTV which at the moment an are silly low.

I think mine is 2.39% plus base rate for the life of the mortgage (2.89% total currently) and if I remortgaged at 75% LTV I could get it at about 1.89% + base rate.

At current interest rate predictions base rate isn’t going to hit more than 1.25% by the end of 2018.

but I don’t plan of having much “cash” sat in my bank as the majority of it I reinvest in my business

self employed? get a broker then. my bank would only offer me peanuts despite an impeccable credit rating and no other debt and 70% LTV plus a sensible income multiple. (mortgage payments 20% of income)

had it revalued at nearly 40%

ah, the self delusion of the mortgage gambler… 😆

I thought this was a thread about “sensible” mortgage advice?

Although rates could theoretically stay the same or even fall, if you had to make a call on the available evidence, then there’s going to be upward movement in the next five years. If you aren’t likely to have the ready cash around to remortgage in 2 years time at the most advantageous rate, I would fix for five or more years.

I certainly would not be banking on property prices rising in the meantime to put you in a better position.

I do tend to be a bit more cautious though about knowing my outgoings. My wife is a credit risk specialist…

there’s a real chance that the slump in oil price and commodities will cause deflation – so I’d not be betting on a rate rise anytime soon. The BoE has been “floating” the prospect of rate rises since late 2013 and 3 years later there’s still no sign of one anytime soon.

“ah, the self delusion of the mortgage gambler…

I thought this was a thread about “sensible” mortgage advice?”

enlighten me ? I have not remortgaged against that 40% value …. ive just taken the banks percieved value to my advantage and use it to get a lower LTV rate …. its not my money , my house will never fetch that money theres no delusion there …but if the banks want to give me a lower rate….YAY ….. mean while when i was a first time buyer they wanted to value it as low as possible and make me pay there worst rate. But neither was i counting on it …. it was a nice to have addition. Id have been sick had i locked in at the 5.99% for 5 years the banks were offering at the time….id still be paying 5.99%

I then followed it up with “that is a fair point – no guarantee youll be able to remortgage in 2 years if rates rise you could quickly get into negative equity as the arse falls out the market…..”

Also …. im not on 5% atm… im on around 2% for 5years atm….. so even after tax my savings are much more lucrative – and should be even more so after the changes to savings taxation that come into effect in april

I always apply a bit more margin to potentially big-impact decisions. At the moment Banks and Building Societies are trying to get more business onto their mortgage books, so decent-length fixed mortgages if you have favourable LTV are well-priced.

One issue aside from rates is that economic pressures may move us back into the situation where it’s a lot harder to get a decent remortgage in two years time.

In a fairly volatile economic environment, how much of a gamble do you want to take on the future availability and price of credit if you can afford a good fixed deal now? We’re all different I guess – I’m very much at the risk averse end of the scale.

Can someone point me at these savings accounts offering higher rates (after tax) than you can borrow for?

I need to open a savings account for my mum – some of hers are paying less than base and the best are only s couple of %

worth noting this RE savings tax when april comes around.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414026/Savings_factographic_final.pdf

I was amazed at how little of the capital we’d paid off by the end

i’m not amazed people don’t have any idea how much will be paid back over the life of the mortgage.
some people naively think that 3.2% rate on £100k will cost them £103.2k when it’s £144,678.03 over 25years

you mean having a spreadsheet of payments vs ammount left vs over payment affect

and a savings interest and investment tracker spreadsheet – isnt normal ?

😀

( i realise this pales in insignificance to some power excel users on here with spreadsheets of bike weights etc etc ….. but it seems incredibly important to me to track where im giving money away….)

i dont know how to use a spreadsheet (they give me the fear) and i only know the rough numbers to within 1k but i class myself as fiscally aware. 🙂

Always worth checking the fees for the two year deals, some where extortionate when we were looking – products with worst headline interest rate figures worked out better as they had lower fees.

Personally if you are reasonably comfortable that mortgage is do-able I’d go for a longer term fixed rate but that’s just me.

As someone says above – some you win, some you lose – it’s all a bit of a gamble.

Santander are paying 3% upto 20k a couple can have 3 accounts so 60k. Our rate is currently 2+base. We are still overpaying, just a lower amount.

This will all change shortly when we need to size up.

I used a broker, I paid him 200quid about which I was quite cynical, because id done previous mortgages myself.
But he got me a DIP the same day I emailed over documents. I had to attend no meetings, all done with phone, scans and email, no need to post any documents, I didnt need to answer any awkward questions about my incomings/outgoings even though I was up towards the upper end of borrowing at 4x my salary at the time, pleasantly surprised and I think worth the fee!

I’m bang on 4* my salary for borrowing and have a deposit that can’t get any bigger than what I’ll be offering in April which makes it 89.9% LTV.

As its my business my salary is likely to grow around 25% for the next few years which is the reason I think getting something fixed for 5 years and then over paying like heck would probably suit me well.. especially with a lodger.. Then it takes out any faff of thinking about the mortgage for 5 years? As some had said 2 years does sound like it’ll go quickly… and I don’t seem to have the natural gift of some of you to hunt that deep.

How can I find a reliable mortgage broker ideally self employed specific?

Side question.. did anyone find the online “you can borrow this amount” calculators quite accurate?

Oh and I do have a halifax account.. should be able to get around £500 by the time I’m applying for the mortgage.

The help to buy government scheme sounded ok too but reading up on it more it sounds a bit crap!