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.

ERC is within the fixed term period on a sliding scale (5 year deal typically 5%, 4%, 3% and so on)

Once you’re out of the fixed term you can move providers, do a product transfer within the same lender, without paying an ERC.

If you want the flexibility of being able to move and don’t mind your payments changing with the Bank of England base rate then a flex term or a standard variable is your friend.

If you need to know your exact outgoings then a fix is for you. Be that over 2, 3, 5 or even 10 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.

Good advice.

My mate bought her house a couple of years before she had her baby. They quickly decided that their bijou early 19th century cottage was too small for 3 people and baby stuff, and wanted to move. Even though their income was unchanged, they were shocked to find that the maximum they could borrow was about 60-75% LESS than they had borrowed pre-baby.

Single
I understand ERC but your info is useful for the OP.

I was simply pointing out that in your previous post you stated the ERC applies to repaying the WHOLE of the loan. It doesn’t. It applies in some products at least to ANY repayment that exceeds the overpayment allowance.

My broker has never charged me a penny.

We had to pay a broker, despite both having excellent credit, when I had to buy my ex out of his "share" of the house. We couldn't get a decent deal anywhere.

Ironically, it was partly because we only needed a small mortgage (£40k) and most lenders can't be arsed with such small mortgages, and partly because of my age (I was 58 at the time). She got us a very good deal in the end, and saved us far more than the £500 her fee was. We had to borrow £50k though, that was the minimum,

We overpaid the max permitted for the first 2 years and saved hard, then paid off a biggish chunk (plus the "spare" £10k we'd had to borrow) when the fixed term ended, and took out another 2-year fix and overpaid. At the end of the second fixed term, we cleared the whole lot.

@AreYouHavinALaugh I'm a very recently ex mortgage advisor (I now specialise in protection) if you feel you want to PM me with questions feel free.

I'm like this with pensions, and if it were me I'd rather you asked and we're clear than not.

Ffs were not we're

don’t mind your payments changing with the Bank of England base rate then a flex term or a standard variable is your friend.

Or discounted variable rate.

Op - I agree re the rate you have been offered. Have a look around at other providers and see what you can find. Santander are v flexible; Halifax do the fewest checks for the "offer in principle" to show the sellers; HSBC have some good offers (but you may need to open a bank account with them). Nationwide are pretty good. Don't bother with Barclays.

You should be able to get 4% or lower. Even fractions of percentages make a huge difference the actual £ over many years.

We got our initial mortgage on a rate of 4.7% with a 10% deposit and paid £737 a month. We took a 2 year deal. The same mortgage provider offered us a deal at 3.1% on another 2 year deal when the first deal was up and our payments went down to £590 a month. They then offered us another deal at 2.8% once the second deal was up and we now pay £565 a month. The first deal you take is always the highest as your LTV is at it's lowest. Once you start paying the mortgage off and your house goes up in value, the LTV is better and there's less risk for the mortgage provider so your rates lower

I meant LTV is at it's highest at first

If you are doing your own comparisons don’t compare them against each other using the APR rate. This includes the whole 25 years based on you having the cheap deal for the first few years followed by the standard variable rate for the next 20years or whatever. You will never go onto the standard variable rate as you will go onto another deal. So APR rates will be non applicable to you. So no point in looking at that in the way you would for a loan. This is different

That’s why you go by the % rate of the product you are going on for the two years or five years or whatever. Use that for comparison purposes. So five years at 3% or two years at 2.5% or whatever.

You will never go onto the standard variable rate as you will go onto another deal.

This is not always possible, you can't say "never". You have to meet the criteria at the time of any new mortgage, and things could change. People get stuck with mortgages that are costly because they assume they will always be able to get a new deal but then can't.

Wishing you luck! Sounds like moving now is the best thing to do for your family. I hope it works out well x

There is hope OP. As other's have said, you may need to take the money at an unattractive rate for a couple of years at the start but, in most case, it's possible to swap to a lower rate after a couple of years, and again if necessary.

The mortgage on this house has gone from a self certified, interest only, 95% loan at 7.5% to a Barclays tracker at 0.18% above the BoE base rate.

Listen, this talk about overpayments and 35 year terms is largely irrelevant when this is your first property.

When your fixed term ends (normally fixed rates are 2, 3 or 5 years) then you remo to a new rate. Then you can a) pay more money in with no early repayment charges if you’ve been able to save; b) get a better rate with a new lender and reduce your monthly payments; c) reduce your loan term so you pay more but have paid it off quicker.

We have remortgaged with our current lender at least twice, this means we’ve not had to go through affordability calculations again. Our LTV has also reduced as although we’d never be able to sell for what they say the house is worth (it’s called a desktop valuation) it has meant that we’ve got a much more favourable rate and have dropped our payments significantly.

I work in mortgages btw although not a mortgage advisor or broker. I would be wary of taking everything to heart that some people are saying because it’s clear what they know is only from their own personal experience.

Speak to an independent broker (not linked to the estate agent) and also make sure you ask about associated fees - legals, stamp duty etc - and costs of moving. It’s all very well getting to the final hurdle and finding your moving costs are £1500 and legals are £1000 and you just don’t have it spare.

Good luck!

PS don’t take what I say as gospel just because I said so, speak to your broker about it!

brokers charge a fee because of all the administrative work required to get to the offer stage.

My broker has never charged. He gets paid by the mortgage company.

@Singlebutmarried I am so sorry I have made a mistake. the 2 year fixed is actually 3.something % not 5%. The 5% is for after the fixed period.

The broker said that it was a mortgage in principal but only sent us this mortgage illustration. She told us we can start making offers.

I really haven't got a clue at all, despite feeling more at ease last night. Thank you all for bringing all this stuff to me, it really is very helpful.

You need not take out protection on dh income if his job is unstable

Sorry you need to take out income protection

Look online for a loan amortisation spreadsheet and play around with the figures on it. Add in an extra payment of £10 per month and see how much difference such a small amount can make in reducing the cost of the loan and the length of the loan. It's fascinating!

When I have purchased property I've paid deposit plus
Solicitor fees
Mortgage arrangement fee
Land registry fee
Property survey
Moving costs
Post redirection costs
Other costs
Property insurance

The transfer fee you see usually around £30 is a standard charge for making high value same day payments. It uses a different payment system (CHAPS) to standard bank payments specially designed for bigger payments.

its pricey because it's an initial term of 35 years. these numbers are looked at again every 2-5 years as you re arrange a new mortgage at the end of each fixed term - no one (sensible) just lets the introductory 2 years run or and then stays on the SVR for the remaining term. once our income allowed, I started reducing the remaining mortgage term by a couple of years each time we renewed.

overpaying is easy - just ask them to set up your direct debit to be higher than the official repayment amount. it is sensible to work on the assumption that interest rates might have gone up by 1% by the time the initial term is over, so calculate what your repayments would be with a higher rate (loads on online calculators for this) and set the DD for this and that way you don't get so much of a shock if rates rise faster than your ability to pay.