Best mortgage when intending to pay most off within a year or two chaotic_j

#1
Hi,



We are looking for some advice on a good mortgage for our situation, currently interested in a property approx. £230K-£235K and will need to get an agreement in principle to make a strong offer.



I have £100K in cash and a property owned outright bought for £108K in 2010. Realistically can put down £85K-ish of the cash as a deposit.



My income is £33.2K - after tax £2K monthly and monthly expenditure £800 which consists of all utilities, council tax on current property - one we like is twice as much, broadband/phone, mobile, petrol to commute, car insurance, food, entertainment and student loan repayments. I have two dependants - partner and one child.



We want to buy the new property before selling our current one, move out, carry out renovations to the old property and hopefully within 6 months put it up for sale. Then once sold reclaim the extra stamp duty paid, make overpayments to mortgage (if possible) then at the end of the term pay most of it off!



Would I be best looking for a short term fixed mortgage i.e. 2 years, on a low interest rate - depending on fees?



I used the mortgage best buys tool and it came up with Yorkshire Building Society, 1.23% for 25 months, £1,230 setup fees, £515 monthly payment, total year 1 cost £6,770.



I have a Newcastle Building Society Big Home Saver ISA that I have held since 2013, it has £30K in it and if you saved above £10K and then go on to successfully complete on a mortgage with them, they give you a £1K cheque.



I can see Newcastle Building Society have a 2 year fixed rate mortgage at 1.31% (slightly more than Yorkshire Building Society) with a £999 fee. The cheque would effectively make it mostly/completely fee free?



Would the Newcastle Building Society be a good/the best option for me to choose if I can get it?



Thanks so much in advance.

#3
Given you intend to pay off the balance so swiftly I think an offset would provide you with the most flexibility - the impact of potentially higher rates applicable to offsets (vs tracker, for example) won't really apply to you as you will pay down the balance so quickly. You could then retain access to (relatively) cheap finance from the offset.

#4
THe issue with offset is you may not meet the criteria of some lenders like FD which has an income requirement of £50k.



With an offset you can have all your renovation money offsetting while you do the old place up.



On the two choices so far.

£235k-£85k means borrowing £150k @ 64% LTV



your two loans over 2 years accounting for the fees and cashback making the same payments.

£151,230 @ 1.23% £515pm £142,488

£150,000 @ 1.31% £515pm £141,463



About £1k better off with the Newcastle, interest over the 2 years around £3600



Ignoring any ERC free overpayments and assuming you can be mortgage free/100 offset in a year(you think 6 months) then the rate you can take to be no worse off than waiting 2 years will be around 2.5% depending on fees and savings interest rates.



There are offsets that are in this range so worth a number crunch.

#5
HSBC used to offer a lifetime tracker with no penalties for early repayment. Not the cheapest, but you'd have to run some numbers comparing the cost of paying a lower rate for, say, 2 years, vs a higher one but for 1 year only.



With some offset mortgages, like First Direct's (for which you don't qualify anyway), there are early repayment penalties; what this means practically is that your savings can offset the balance of the mortgage, so you don't pay any interest, but you cannot sell the property before the term of the mortgage is up.

#6
Hi,



Thanks for all of the advice. I now have the possibility of borrowing the money off family that I would need in order to make a cash offer on the property.



I would pay family 1.5% interest as a 'private mortgage' how would this usually be arranged? Once my current property is sold, I would pay most of the borrowed money back to them.



The idea is we will save money on mortgage interest and fees, they will get a reasonable rate considering the financial climate on a large chunk of their savings. It isn't anticipated they would need this money in the immediate future.



Thanks in advance.

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