To ask advice on Mortgage rates?

[AreYouHavinALaugh]

Me and DH have just gotten a mortgage in principal, but after working out what we would have to pay back we are unsure whether it is the right move for us.
We would be borrowing 140k
But paying back 290k over 35 years.
This seems ridiculous but as we don't know anyone who has brought a house recently (asking my parents they said they put £100 up for a deposit... so can't really compare)
We have a £7000 deposit so 5% exactly.
Also one default from 5 years ago which we disputed and then eventually paid just to make it go away. It was for £350.

We don't know what to do as we would be at retiring age y the time we pay it off. First time buyers.

Would you go for it? or wait and build a bigger deposit. It would take us about 2 years to get to 10% and by then the default would be past the 6 year mark so not show on credit rating. Just need advice.

What is your Apr and monthly repayments. Hard to have much useful to say when you turn this into a drip feed.

Go for it.
You’ll be locked in for a certain length of time, 3 or 5 years usually. After that time you can remortgage and get a shorter term as hopefully your wages will have gone up.

I did the opposite. I extended mine by 2 years a while ago. Only ten years left now.

That’s what mortgages are like though. We are buying £250k and paying back close to half a million.

We plan to overpay as much as we can

Mortgage interest is ridiculous. Despite what looks like a low interest rate, it is over such a long period, you do pay a lot more than the cost of your house. A 5% deposit is very small, but if you are currently renting then it could be worth buying rather than throwing your money at a property that will never be yours. Perhaps see a mortgage advisor to get actual advice, not just from people on the internet who don't know your circumstances.

Oh, and anyone who has bought a house will tell you never to look at the statements.
You pay hundreds each month yet you only seem to pay off about 80p.

The figure you've been quoted is assuming that you'll stay with that mortgage deal for the next 35 years which of course you won't. No one knows what will happen to house prices or interest rates in the future, you might pay more if inflation rises, but in a few years when you're credit rating improves and you build up equity payments might fall. You may be able to over pay and that will also reduce your total repayment.
Renting won't get you any equity ever and in 2 years you'll have 33 years to repay so higher monthly payments. I'd go for it. Think of it more as the cost of a place to live rather than in terms of the total loan. Over time inflation is likely to decrease the cost as well.

How long is your fix and at what rate?

If you want to buy now I would look to overpay your mortgage if you can, even small amounts, help and hopefully in a couple of years the default will be off your record and your LTV will be down to 90% which will allow you to remortgage at a better rate (assuming interest rates don’t go crazy) and potentially shorten the term.

And really what is the alternative- paging 100s in rent which is “dead” money

Floaty
I tried not to drip feed. apr is 5.something I forget exactly.
repayments will be around 550 for 2 years and then go up to 730 I think for the next 33.

Flamingo
remortgage? how do you do that?
Well my OH's wages wont go up for at least 5 years and I am pregnant so wont be going back to work for at least 5 years as childcare is so expensive and we can't really afford it now so SAHmotherhood is actually cheaper than working.

We can easily afford the repayments for the first 2 years but itd be a stretch to pay over 700 a month. Plus bills, I think it will be fixed rate (?) although I am not 100% on all the terms yet..

After the fix rate ends you will remortgage to a different rate. It's very rare you will be stuck paying the standard rate.

After a couple of years of paying down the mortgage you may be in a lower LTV, the default will be gone and you will have access to better rates.

We have been to 2 mortgage advisers so far and are going to see another next week but I don't really know what to ask or how to articulate my questions without sounding like a child.
Also there is so much jargon that I have to ask 'but what does that actually mean?' about 5 times until it is dumbed down enough for me to even get the gist. I also don't know what to ask!

So I can remortgage as soon as the 2 year fixed rate is up and then I will possibly get a cheaper mortgage because the default wont show up anymore? Is that right? Even though the bank (or lender person) already knows we have had a default? Can you go to a different bank? or lender after then?

And I was under the impression that if you want to over pay on a mortgage you have to pay a fee? Has anyone got any real life experience with this please?

For what it's worth We only pay 4400 a year in rent. So very cheap. However we have 4 children in a 2 bed and size is getting to be a problem. Do you think itd be cheaper to stay and save for a year or 2 or just start paying for a mortgage now?

and paying back just over double normal-ish?
What I mean is, is it expected? The price you take for getting on the property ladder?

Also, could we agree to a 35 year mortgage but over pay so we get it down to 25 years in the end?

The two things that affect repayment amounts are:
Interest Rate - APR
Term
So
The higher the rate the higher the payment
The longer the term the lower the payments

The interest rate is a measure of how risky the lender thinks the loan is they will take into account
Credit history ie the default which I believe drops off after 6 years
Loan to Value - LTV

LTV is a big factor because if you default the mortgage provider has to sell your house to repay the loan. The closer the amount of the loan is to the value of the house the bigger the risk that the cost of selling will mean that they don’t get back the whole of the loan amount.

The lower your LTV the better the interest rate. So as your LTV improves as you repay the mortgage and/or house prices go up, you can switch to better interest rate at the end of your fixed period ie remortgage either with your current provider or a new one.

I overpay. My fixed term allows me to overpay up to 10% of the original value of the loan in any year. If I overpay more than that then I would have to pay an Early Repayment Charge.
You need to check the terms of the mortgage offer as they differ from provider to provider.

You won’t be stuck on that interest rate forever, things will improve as your ‘loan to value’ percentage increases. This doesn’t happen overnight but gradually. However, at the end of any fixed term deal, you’ll be offered options to switch to another fixed term deal or go onto your mortgage lenders basic variable rate. The fixed term deals are almost always better. Our current interest rate is 1.8% (around 30% LTV). Your mortgage deal will always be a better option than renting.

Yes, you can overpay. Whether you pay a penalty or not will depend on the mortgage you take out. I overpay massively which will reduce my 30 year morgage to 15 years without paying a single penalty.

Once your 2 year fixed period is over you can move to another lender. Your house value may have gone up by this point so LTV will be higher potentially bringing down the apr and monthly repayment. It may also allow you to reduce your term.

Ask as many questions as you want, I wouldnt worry about sounding stupid, you are lending 160K!! You ideally want to know what you are agreeing to!

How secure is your rental tenancy? If it social housing I would stay put.

What proportion of your take home pay will be mortgage repayments? How do you feel about that? Is there scope to overpay?

Random strangers could advise you to buy a house or not but the best advice would be to read a guide to mortgages from Martin Lewis etc to enable you to make an informed decision with the aid of your mortgage broker.

As for overpaying, most mortgages allow this fee-free within a certain range. When we changed our mortgage deal to lower interest rates (not changing lenders, just a different deal with current bank), we chose to keep making the same payments as before, so paying off the mortgage quicker. We will now probably pay off about 6 years early, which is great!

Go for it. I started off with a 30 year mortgage as that was all I could afford at the time and I ended up paying it back in 17 years.

Also don’t get hung up about things like this ‘then go up to 730 I think for the next 33’.

There is no way you will be paying £730 for the next 33 years. You will remortgage when your deal runs out. None of it is as scary or bleak as it seems at the start.

You're only tied to the mortgage for as long as the fixed term lasts. After that you can switch to a new mortgage with the same or a different lender. If you move to a new lender you will have to go through all of affordability checks again though.

There are 2 main types of mortgage, fixed or tracker. Sounds like you are going for a fixed, the interest rate on these is fixed for a set period of time, generally between 2 and 5 years, although some 10 year deals were available last time I took ou a mortgage (about 6 months ago). You are normally tied in to the mortgage for the duration of the fixed rate, after which you can change to a new mortgage. If you don't change you pay the banks standard rate, which is higher. At the end of your fixed rate you can move to another lender or stay with the same lender on whatever product they can offer. I'm with Nationwide and last time I got to the end of a deal they wrote to me, they had a mortgage that was competitive i could switch to, so i did, took about 5 minutes online.

Tracker rates track the Banks of England base rate, they are currently about the same cost as fixed mortgages, when interest rates were higher they were normally cheaper, if interest rates rise they go up, if interest rates fall they go down. They are also set for a period of time, at the base rate +x%.

So at the time you're deal runs out look at what your house is worth and the amount of debt outstanding, as your loan to value (or %deposit) will have changed and look at new mortgages available and switch to a better deal.

I highly recommend Martin Lewis's Money Saving Expert website.

Right, this is why I came onto the internet for advice. The mortgage advisers are great and all but I have learnt more in 5 minutes from you lot that I have in months of looking online at official websites and 2 long sessions with different advisers. I am so grateful, thank you so much.

We have been crying and feeling like crap for the last 2 days, worrying about paying £730 a month in 2 years. All for nothing. We almost rang the viewings and cancelled them- I really can't thank you all enough for actually giving me real answers with real experiences in plain English. I think we will go for it!

Thank you! I almost didn't post this as I thought itd be a unanimous "no wait and save more" but it would be wasted money afterall.
Also the first mortgage broker we spoke to advised us to wait and try for a 10% deposit- they said not to bother applying for MIP. The second was alot more optimistic and we applied for the Mortgage in Principal in her office so I wasn't sure what to think or who to believe.... Hence the freak out

5% seems quite high, even with a default. If you havent spoken to London & Country yet, give them a ring. You dont pay for their advice and you can often get better deals.

In answer to your questions, you can remortgage with another lender after 2 years. Its a bit more time consuming - you have to provide all the paperwork again, but its usually worth it. If you stay with your existing lender, you can usually just do it over the phone.

We've had a mortgage since 2001 and have remortgaged every 2 years - so 8 times now. Sometimes we've stayed with the same lender but we usually switch.

When you start off, you have a high Loan To Value (your house is worth say £200k and you borrow £190k - the loan, compared to the value of the house, is 95%).

Over time, you pay down your mortgage and the value of the house increases, so in 2 years time, the house might be worth £230k and you might only owe £185k. Your loan to value then is 185/230 x 100% (about 80%). As your LTV goes doen, the interest rates go down, so it always worth looking round to see what rates are available.

Go for it now. You may struggle to remortgage if your finances change and you are penalised for having kids - affordability criteria. I’d suggest finding a longer term fix so you are in a better position after the fixed period. Eg five years so your DH might have a pay rise and one child is in school at least. If two years would may have two kids and no pay increase.