FTB and LTV options

[TinyTroubleMaker]

I'm a FTB, had offer accepted on a property at £250k. I had anticipated putting a £60k deposit down. I have £10k beyond that in savings for fees etc, and able to save up to £1k per month from wages currently.

Met with the bank today. If I stick to the £60k, the LTV is 76% and the interest on the mortgage about 3.5%. Whereas, if I increase the deposit to £62.5k, the LTV is 75% and so I can get an interest rate of more like 1.2%.

Bearing in mind I can probably save that in the 2-3 months to exchange.. would you stretch and go for the better interest rate?

There is also the question of 2 year or 5 year fixed. And the term - I'm looking at 30 years but could look at a 25 year term. The lady at the bank said to focus on what I want to pay monthly rather than the term, but the 30 years would take me to retirement age 70 and does make me a tad nervous.

Crikey, we have a rate of 2.3% on a 5 year fix 80% LTV purchase (going through right now). Have you shopped around/contacted a broker?

Absolutely go for the 75% LTV.

Do you know what difference it makes in your monthly payments?

Definitely shop around if you haven't already... i think as a FTB wanting peace of mind, focus on a comfortable monthly payment and overpay whenever you can. I feel the term isn't important as you will most likely ditch this lender and switch to new term whenever your fix is up anyway.

Also a quick comment for the 30 year term - I was an FTB 6 months ago and had the same feeling. However now I see that it really is about your monthly payment; I could have went for 30 year instead with a lower monthly payment. You will get a new rate anyways at the end of your initial term and the interest you will pay during first 2 or 5 years is absolutely the same if its 25 years or 30 years. It all depends on your outstanding balance.

In your case I would:

• add 2.5k to get a lower rate
• go for 30 year to have smaller minimum monthly payments to leave some breathing room
• try to make overpayments after the first few months (and check the T&C for overpayments, they usually allow 10% margin each year)

Definitely go for the lower rate. Also remember that in the next 30 years, your income could increase so you may be able to save more and overpay on your mortgage.

Thank you. I haven't shopped around, just so busy. I'm a lone parent, working full time and more, struggling to even find time to sort out basic solicitor papers this week and the estate agent is chasing me! I don't want to lose the house, it's a good one, by not moving fast enough...

The difference is about £100 per month in monthly mortgage payment so, or does look like it makes sense to increase the deposit. The difference between about £630 and £730 per month. Same for 2 year or 5 year.

For that I get a 4 bed house whereas currently renting a tiny 2 bed for not a lot less.

I was in touch with a broker a couple of years ago, will see if I can dig out her details.

Stick your details into money super market mortgage comparison jobby at the very least to give you an idea of other options.

Don't worry about the 30 year term you can pay off early view overpayments etc. Money saving expert has an overpayment calculator and even small overpayments add up over the life of the mortgage.

I would definitely go for the 75% LTV - you will easily save the difference by completion as solicitors are not working quickly at the moment, they’re swamped.

Personally, at 1.2% I would fix for as long as possible. I would also go for the 30 year term but overpay as much as you can afford to. That way if you go through a lean patch financially you have the option to pause the overpayments.

Thank you. So the 5 year fix is a better way to go than the 2 year.

We have 85% LTV and 2.1% mortgage. All we did was go on MSE mortgage comparison, their options were cheaper than anything Habito offered us. It’ll take 2 minutes and could save you hundreds a month

3.5% on 80% LTV?! That's ridiculous, shop around! Speak to a broker if you're limited on time.