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.

Try this guide from the government agency - designed to be unbiased and for complete newbies

www.moneyadviceservice.org.uk/en/articles/mortgages-a-beginners-guide

Thank you I will look into martin Lewis.
I am reading all this out to DH and it is the first time we have smiled and laughed in 2 days.

The mortgage will be with a highstreet lender which the first guy said we wouldn't be able to get. I am very excited now!

I go to an independent financial advisor who does our mortgage stuff for us. He is brilliant. He handles everything.
We started off struggling to afford it but we are now on a fixed rate of 2% for the next 10 years as who knows what the future holds and I want to know what my payments will be each month.

With the remortgage it’s just changing it when the fixed term ends. You don’t have to but you would be crazy not to.

Do it. You will be able to get a better interest rate when you renew. Overpay your mortgage by as little as £5 a month, you will be surprised at the difference it will make to the term of your mortgage. I know it sounds a scary amount to borrow but in in 25 years time it will seem like next to nothing compared to how much your property will be worth.

Loads of people find it really confusing. I really think schools should have compulsory economics courses. We moved 6 months ago, so took out a new mortgage, I was interested in the cost over 2 years and the repayment penalties. Cost over the life of the mortgage are meaningless.

Some mortgages will have an arrangement fee, and you either pay that up front or add it to the amount you're borrowing, this can mean a lower interest rate is actually more expensive because you're paying a huge arrangement fee. Make sure your mortgage broker shows you the cost over the fixed term. They should take it into account and direct you to the cheapest overall option.

Interest rates aren't expected to rise soon, but they are very low at the moment and when the economy recovers the Bank of England will increase them, nobody knows when this will be, but your repayments might go up in 2 years if interest rates rise. You need to consider how a .5 or even a 1% rise will affect you - seems unlikely at the moment, but it's a possibility. If you can overpay, this could reduce your mortgage term, or it could allow you to reduce repayments in the future for a short period.

You've been crying for two days because you think you cannot afford to pay your mortgage in two years time?

I honestly do not think you should buy a house. It is a big step and I do not think you are up to it.

@Africa2go 5% seems high fo r what sorry? I have no idea

and thank you for explaining loan to value. It seems so simple when you 'get it'! I was just about to google it (for the 10th time!)

FWIW we currently pay 400 a month in rent but we have been saving 400 in ISAs and another 4-800 a month towards our deposit so we can definitely afford to over pay.
I didn't think about the savings because we have been treating it as a bill but I just realised that money will be free!

m00rfarm that's terrible advice, the op has explained she didn't understand she could remortgage. Lots of people don't have a good understanding of how mortgages work, often even when they've had one for years! Its highly likely she can keep her repayments similar to her initial deal in 2 years, obviously buying a house is a risk, but renting is far more precarious IME.

TBH, your deposit is tiny and you would be better off saving for a bigger one. More likely to get a more favourable rate, even if prices don't come down much more.

@AreYouHavinALaugh you said the APR is 5. something. Thats what i was referring to when I said 5% seems quite high. Interest rates are low at the moment. Shop around. Ask your mortgage advisor if they are "whole of market" - as the name suggests, they can look at all lenders across the whole market to find the best deal for you. Some mortgage advisors are tied to particular lenders / banks so they can only recommend deals from those particular banks.

@wonderstuff
we not sure about arrangment fee but there is a

• funds transfer fee for £35

-mortgage exit fee £65 -sealing fee £134

the broker will be paid £250 upfront and another £300 when we get the keys. is this the arrangement fee?

5% is high but you need to check what the tie in period is for your offer and what the penalties are for moving mortgage at any point.

Go on money saving expert and get their guide to first time mortgages which explains all the jargon. Also definitely check with a broker who might be able to get you a lower interest rate, a lot of what you repay at first is interest.

Have you considered fixing your rate for 5 years? You might pay slightly more each month but it means you know that you have 5 years at that set price.

Overpay and also every time you remortgage reduce the term by as many years as you can financially manage.
Keep asking the questions you need to know there not daft most first time buyers don't know what it's all about.

Don’t take it for granted that you can remortgage - if your mortgage is based on two salaries and no dependents now you’ll need to apply again as a one income family with dependent(s) in two years.

The impact of kids is high, they slashed our potential borrowings to the extent we didn’t bother trying to move to a bigger house. It doesn’t matter if you can easily afford it.

Hello, ex mortgage broker here, so lots of real life experience.

The figure you give of paying back £290k is a calculation based on a number of assumptions; 1-that you don't remortgage, 2- that you don't ever over pay and 3- that the rate you pay when your fixed rate ends never changes. All of these assumptions are likely to be wrong, so really it's a guess rather than written in stone. In reality, you are likely to remortgage ( you almost certainly should do, and if you are going with a mortgage broker they should remind you to do it and help you with that process), and no one knows what rates will do over the next 35 years.

Most fixed rates will allow you to make overpayments of up to 10% of your mortgage balance with no penalty per year. So in year 1, if you took out £140k you could over pay £14k without charge. Next year it would be less as you'll have paid money back and will be able to overpay 10% of the mortgage starting balance for that year. This rule is pretty standard but you must check your mortgage documents / information your broker you want to make over payments as there are products without this feature.

My tips for seeing a broker:
1- Ask as many questions as you need to understand. They are there to help you, and you are getting into the biggest financial commitment of your life. You need to be comfortable.
2 - Make sure any decision in principle is from a lender (e.g. Natwest, HSBC etc) and not just the broker firm. Certain large brokers issue an 'decision in principle' but they have only done an affordability calculation based on what you are likely to be able to borrow. Unless you've handed over proof of earnings and done a credit check with a lender, you don't really have an DIP, especially if you have a default in your past.
3 - shop around on the fees front, bit if you find someone you like, and who communicates well they can be worth it.
4- if you haven't already, budget to make a will and look at mortgage protection. You said you have 4 kids, you are about to take on a lot of debt. Try and protect yourself a bit if you can afford it, at least while the kids are young.

@wonderstuff Thank you for sticking up for me- it's true I have no idea and we were upset because we have had trouble getting to even this point. We were worried that if rates rise we would be stuck with something even higher and lose the house.

We are in social housing atm but it is a flat and in dire need of repair. Our balcony doesn't lock, we have been waiting for non essential repairs (radiators broken, balcony lock broken, doors broken, windows cracked but not yet smashed) for 5+ years. Terrible area, lots of crime and having to walk past and 'live with' drug dealers, junkies etc on a daily basis. Another year would be hell and I have had severe depression. So on one hand thinking 160k interest would be worth it.
On the other hand we dont want to be stuck with a massive mortgage we can't pay. DH is in an unsafe job and drives 200-500 miles daily. many of his work mates have had accidents at work (and crashes on the motorway getting to work) resulting in months off.
DH has been in 2 crashes since I have known him- and one broken foot just before we got together so these are real concerns.

He is due to be working away next year for almost a whole year only coming back home once a week for less than 24 hours so we wanted to be settled by then. I couldn't take a whole year on my own in this flat with 4 children. young children. We had a junky living outside our flat for a few weeks last year. Police couldn't patrol the place to keep him away. He peed and pooped and vomited outside our home (and everyone elses, on the stairs and hallway- I had to take my children past it and try not to wheel the pushchair through human faeces. HUMAN. It was disgusting and we found used needles. We have reached our limit with this place. Although the views are nice.

@Africa2go its over 5% but I can't remember what exactly.
we are speaking to someone else next week but the adviser who we went to first wouldn't touch us with a barge pole and the second one said they work with over 250 lenders.
we only fit the criteria of 3 of those and this was the best one, they said. Only a soft search on our files so far so we were worried we might not get accepted for the actual mortgage.

we have had trouble with fraudulent credit card account but have not been able to prove it was fraud so in the end paid it for an easier life. I wish we had sought legal advice though because apparently we have made it harder for ourselves by paying it (which is I suppose what the company wanted in the end. after we were threatened with bayliffs I just paid!)
Paying it is like an admittance of guilt but I said I would only pay it if it would be wiped off completely. The company agreed but apparently as there is no written record (phonecall) we can't prove it. The company has a 'all calls will be recorded' message though ! unfortunately we don't have access to the call recording
This is where the default came from, Thankfully we 'caught' it before it became a CCJ or worse. Luckily it was the £350 account we had trouble with, not the £3000 or £2000 one!

Why are you taking out a 35 year term? That drags it out for longer and means you pay more in interest than taking it on a 25 year term.

We took out a 20 year term and overpay every month, so after 5 years of overpaying we only have 12 years left now. Our rate is only 1.5% though which helps.

Defaults go from your file after 7 years. So provided nothing changes you should be gone if you remortgage in 2 years time.

Also, the APR shouldn't be confused with the annual interest rate. The APR take into account the interest rate and all the other fees you are paying, including fees to the broker, so how much you pay your broker will affect your APR

@RenegadeMrs
The early repayment section says :

You have a right to repay this loan early, either fully or partially.

Early repayment charges are payable for the next 2 years

Basis of charge
£199, plus 3% in year 1, 2% in year 2 with a fee free allowance of 10%

Year 1 max charge for period is £3790
year 2 ma xcharge for period is £2550

The ,ax you could pay is £3591 with fees which currently total £199

Am I right in thinking that this means we can pay up to 10% without the fee?

How would you go about over paying? Do you have to tell them at the start? or do you just pay whatever you can extra every month?

@ShastaBeast lender do penalise you for having kids, but by different amounts. Give HSBC a try if you are having issues on this front. They are one of the better ones for not penalizing you for having dependents. They are quite strict in other ways though, so it doesn't always work out.

@AreYouHavinALaugh you need to afford your mortgage payments over the term, but you can have a mortgage of any increment. It doesn't have to be 35 years or 20 years. Even taking the term to 32 year could save quite a bit as long as you could afford it.

Here to recommend London and Country too. Give them a call.

That is the early repayment charge details. You need to look further down the document to the 'additional features' section to find out about the overpayment allowance. It should be mentioned explicitly.

Most lender will allow you to make one off overpayments over the phone or set up direct debits to overpay monthly. You don't have to notify them at the stat, it can be done whenever you like if overpayments are allowed.

@blue25
I don't know! This is what we were offered as a Mortgage in Principal!?!
We told the broker/adviser we wanted a 25 year term, but have been toying with the idea of 20 or 15 years, we probably could afford higher payments. especially as DH is going to be a non existent cost for most of the next year as he will be living off hotel food paid for by work.