Is it worth getting a mortgage with 3.99% interest fixed for 2 years or is that as bad as renting?

[GlowingR]

Is it worth getting a mortgage with 3.99% interest fixed for 2 years or is that as bad as renting?

Can't afford high street lenders so for 190k = 160k mortgage, fixed 2 years, at 3.99%, 30k deposit.

I realize I'm not paying off a lot of the capital off in the 2 years....

With regards to remortgaging, can we contribute more to the deposit at this time too?

If I was to sell, how does it work when I'm only 1 or 2 years into paying it off? Do I lose the deposit, etc.? (Assuming my lender allows me to sell in 2 years)?

Have you gone through a mortgage broker and is this the best deal you can get? If you can afford it for 2 years then it would be worth it and then you can re-mortgage with a better deal.

There are likely to be early repayment charges if you sell within the 2 years.

Check the KFI carefully and see if the mortgage is portable.

The interest will be just over £500 pm. However there's costs to buy on top and again if you decide to sell after 2 years.

Plus the big risk in what could happen to property prices if you sell. If prices go down, you could lose your deposit, if they go up, you could end up gaining.

What do you mean about 'cant afford high street lenders'. You have a decent deposit.

Second the recommendation to see a whole of market broker.

This is the best and only deal I can get. My salary isn't enough to stretch to cover the mortgage I require.

What’s the timeline on your credit file? I assume there’s something on there that’s pushing you sub-prime.

If once the two years are up you’re in a better place and your default or whatever has dropped off, then you’ll be in a better place.

My first mortgage was before the market crashed and at 6.5% was a prime rate. BBR was 4% I think?

So whatever you take now, you’re likely to be in a much better position in two years. Even if base rate increases you can get a high street lender.

What do you mean about 'cant afford high street lenders'. You have a decent deposit

High street lenders will not consider those with poor credit files - anything from a single missed or late payment up to bankruptcy. Or they will cap the LTV.

I’d say yes, in two years you can remortgage and add some extra capital to it and your situation will improve. We only had a 5% deposit on £350k house, in a year we will product switch and improve our 3.30% rate and in a further two years we’ll remortgage and improve our rate again hopefully. You don’t loose your deposit when you sell, but remember prices are not rising, and lots of properties are being downvalued against two years ago, so you may not get it all back. Only take out a two year fixed rate if you plan on staying only two years, otherwise you’ll get charged to sell it before.

FIrstly, you don’t ‘lose’ the deposit. If it’s a 2-year deal, but you sell sooner, the bank will usually charge a penalty for early repayment (1-2% but it’ll be in the contract). If you borrow 160k, the bank will want their money back, eg you sell for 190 again, the bank takes their money and you get your deposit back.

There is no such thing as ‘lender allowing to sell’ - it’s your property and you can do what you want.

It generally isn’t advisable to buy and sell every year or 2 as you have moving costs (estate agents, solicitors, removals people, maybe stamp duty) every time you move.

When you have your mortgage, you can usually make overpayments (it’ll be detailed in your contract). That means you can pay extra every month or in lump sums to pay the mortgage down. If you overpay by £200/month for 2 years, it’ll add up to almost 5k.
That means that, eg in 2 years time the flat is worth 190k, your mortgage is down to 150-ish so you can get a better deal (with your lender or another lender).

Is it better than renting? The interest on your mortgage will be just over £500/month so if you can rent the same for less, that might be better. However, you’d need to factor in all the fees (solicitors, estate agents etc) if you only want to keep the place for 2 years.
You also need to think about prices in your area - if the prices are likely to go up, it’s better to buy now rather than later.

www.google.co.uk/amp/s/www.moneyadviceservice.org.uk/en/articles/mortgages-a-beginners-guide/amp

Here’s a guide so you can get your head round the basics.

Thanks everyone so far

@2ndAugust Is it possible to add more capital in terms of adding a further deposit prior to remortgaging?

Yes, OP. You can pay the mortgage down before remortgaging.

If you have a mortgage you are paying down the lending therefore gaining equity or more cash when you come to sell as each month the bank owns less. Therefore yes, better than renting where you get no equity.

If you’re intending to move within 2-3 years I would rent, if I were you.