URGENT - mortgage advice

[Becaroooo]

3 year or 5 year fixed rate?
no fee and free valuation.
Help!

What's the difference in the rates being offered?

Compare the interest rates being charged & any penalties for early redemption or overpayment. What rate would apply once the fixed rate expires? SVR or some other amount? Also look at your own circumstances. The main reason for taking out a fixed rate is the peace of mind you get from being able to budget a set amount each month. No-one knows what will really happen to the bank base rate but the feeling is that it will rise in the next couple of years. Would you personally feel more secure knowing your outgoings were fixed for a longer period? Or would you rather commit for a shorter time and then remortgage three years from now?

Hi cog

We would ideally like to know what our monthly outgoings are and cut our cloth accordingly IYSWIM? Also, I dont want to be worried every month about BofE base rate rises. I agree they have got to go up sometime.

Also, a 5 year FR would actually cost less than a tracker for us as we only have a 10% deposit!!

So, we are going for the 5 year fixed at 4.79% - no fee and free valuation. Cheapest tracker I have seen is 4.99% with fees applicable.

We feel that - as this is our forever house - that we have gone up to the maximum we are happy to borrow i.e. 3 x dh's salary and a third of our monthly income in repayments.

Who knows what the future will bring??? Part of me thinks we could be better to wait it out til next spring, but then we could very well be in a position where properties cost less but we cant get a mortgage!!! Also, as we dont plan to move again, if we do go into negative equity, as long as we can afford the repayments, it wont be an issue.

Does that make sense?? >

When we took out our last mortgage and had to make a similar decision we got the advisor to calculate what different interest rate rises would mean to us. There was a difference in rates between the 2 products and a fee associated with the fixed one. We calculated that the interest rate would have to ave risen by 1.5% for over 12 months before the extra would have covered the fee alone. Its really worth working through te difference scenarios.

If the monthly payments based on 5 years at 4.79% are manageable, and you value security then that is probably the right product for you. Yes, negative equity is only an issue if you have to move house. Irrelevant otherwise. No-one ever knows what the future will bring, but you can manage the risk. If you set aside something from your monthly income as a rainy-day fund & budget carefully you can cushion yourself against unexpected costs.