first house :) mortgages etc

[David _b]

Strange i just found this section, given i dont post much anymore.

Anyway, anyone else been in the house purchasing circles lately ? I have been viewing this past few months as a first time buyer. Its strange when you start looking and doing a few viewings, you find out you are reasonably hard to please. Or it actually sures up what you actually want.

Anyway, have found what i want, made my offer which was rejected (naturally), upped my offer which was accepted. The whole thing is indeed rather daunting now. I have had over christmas to think about it more

anyway, whats the current feeling on mortgages ? I seen an advisor, who didnt really advise that much, more just tell me what deals are on offer from lots of lenders. But from my own thoughts i am considering 20% deposit, 25 year tied in for 5 years. The mortgage payment is about a quarter of my monthly income, i dont have any other large outgoings but still seems scary lol

 

[OpenToSuggestions]

I bought my first home in May 2013, with HSBC 90% LTV 4.15% (best on the market at the time), resulting in 30% of my income going on the mortgage.

Don't use a financial advisor. They offer nothing over a Google search. With 20% deposit you're not in an awkward financial situtation anyway!
In the end I ignored my advisor, saved a £300 advisor fee and found a cheaper interest rate with no mortgage fee!
Definitely do your homework and grab yourself the best mortgage deal out there.

Always try to overpay on your mortgage. For me just £14 extra per month cut a whole year off! A little now will make a massive difference in later life.
http://www.hsbc.co.uk/1/2/mortgages/overpayment-calculator

How old are you? If you are <30 really try to avoid a longer mortgage., even though it is tempting So many people go for 35 years now .
After 10 years you'd own so little .

How long you fix for is totally your call.

EDIT: Always look at the 'Initial Interest Rate' column when comparing mortgages. For example it can be confusing to see a 'Wow 1.5%' mortgage but with a £2000 fee. You can ignore the interest rate after the fixed period as you should remortgage just before the fixed period ends . Note: If you do not remortgage you will go onto the variable rate, which is rubbish.

 

[David _b]

im 28

i intend to overpay once the dust settles etc, im allowed 10% overpay with the mortgage lender that seem reasonable (not that there is much between them all)

the advisor gets his fee from the lender

Im in secure employment, company going a long time etc, im there 8 years, some boys are there 50 years (crazy i know, all the working life from school to retirement in one job) but it still makes me think what if, should the worse happen. The manufacturing industry is not the strongest place to be,

 

[osc89er]

FYI - most of the time the 10% is measured against either the starting mortgage sum or the outstanding mortgage at the beginning of the year.

Or, in other words, more than most people have to spare (check your paperwork and don't just assume).

 

[David _b]

yeh, ill not be throwing anywhere near the limit in,

 

[HungryHippos]

25% of income is manageable I reckon.

Fix as appropriate, although I think 5 years is a good "hedge your bets" length.

2 years - if you're willing to risk that interest rates will remain flat for 2 years or more, this is the best rate to start on.
3 years - interest rate close to 5 years, not worth it over 5 in my opinion.
5 years - decent rates, quite a long term of guaranteed payments/no surprises. Expect re-mortgage in another 5 years to be at a higher rate though.
10 years - fix for this if you don't mind paying more, but it's 100% going to stick your payments to the same for 10 years. I would not get this unless I was reasonably sure that interest rates would take off quite significantly.

Overpay by a little just not just to reduce the term, but also so that in the event that interest rates do go up you can reduce or stop overpaying, and you won't notice a difference in your outgoings. Plus interest rates at an all time low, savings aren't doing much. If you can get to the next "breakpoints" for LTV then it may help your next mortgage renewal too.

I'd suggest caution on arrangement/mortgage fees, not the broker ones, but the ones the banks try to charge you. Fee free ones will usually work out better even though the initial interest rates are higher. The only exception might be if you are borrowing a lot.

Using Nationwides' mortgage calculator (http://www.nationwide.co.uk/products/mortgages/first-tim********s/mortgage-rates?buyerType=ftb&propertyValue=100,000&mortgageAmount=80,000&additionalBorrowingAmount=&mortgageTerm=25). For example you borrow 80K on a 100K property (20% deposit) for 25 years. You typically find two types of fixed mortgages, the ones that come with fees but a lower interest rate, and the ones that come with no fees but a higher interest rate.

at 2 years this would be:

Fixed with fees of £999 - 1.94% £336.75 p/m
Fixed with no fees - 2.34% £352.48 p/m

The second one is better, because the difference in monthly payments is £15.73, with 24 month term that is 24 * £15.73 = £377.52.

At 5 years:

Fixed with fees of £999 - 2.84% £372.74 p/m
Fixed with no fees - 3.04% £381.03 p/m

The second one is still better, difference of £8.29 a month. Over 60 months that is 60 * £8.29 = £497.40.

The more you are borrowing the more this may reverse the other way, but smaller mortgages there is no way that paying 1% of the total value as a product fee makes sense

 

[David _b]

yeh, i have done some digging, spent a good bit of time on nationwide calculator as its easy to use (its open in a tab now actually)
I dont see any of the ones with a upfront fee as coming out on top in the end, the sums never add up, so im avoiding ones with a fee

There is about £50 difference per month to tie in for 5 years, as apposed to just 2 years.

A 1% rise in rate equals about £50 per month

It is a bit of a gamble, go with 2 years then get a 5 year one seems possibly the best option, as i dont see that 1% rise inside 2 years. But it might, who knows.
I also cant be bothered with a remortgage so soon, so swaying toward 5 year

 

[HungryHippos]

Well I had the same dilemma 2 and a bit years ago, I went with 2 years and it worked out well, but... it's been 0.5% base rate now for 7-8 years. My next fix will probably be for 5 years tbh.

Real question is how much longer can it stay at 0.5% for? The answer I think might well be less than 2 years, though small rises expected only.

The fee ones might work out better if you were borrowing loads, like 300K+ or something.

 

[David _b]

yeh, i cant see any big rises in rates, though didnt america raise there rate just before christmas ?

I was going to put up 15% but have decided i may as well put 20% up, to help reduce the payments going forward.

Then, there is the other insurances that have been mentioned to me, life insurance, income loss insurance, both are about £25 a month each

 

[HungryHippos]

I took Life insurance in case the worst should happen my family get something.

Didn't bother with the income loss one, Nationwide let you pay your payments with overpayments at any time, given I have overpaid many thousands now I could probably not have to worry about paying mortgage payments for quite some time before it became a problem. Also people say sensible to have a pot for about 3 months worth of living costs if you lose your job or anything.

Not to mention some only pay out for so long anyway, or in certain conditions, it didn't seem worth it, especially at £25 a month. Income Loss if you need it maybe, but I'd see if I could find a better deal than that tbh.

 

[David _b]

im told this is were the advisors make a few quid. on the life insurance they offer to package up, then income loss insurance..

 

[HungryHippos]

Maybe but you gotta look out for number 1, you gotta pay it after all!

I got Life Insurance + Critical Illness cover from Aviva via my broker for £12.50~ a month all told, yours sounds a lot higher. Mine was only securing a £92k mortgage though.