First time buyer - Mortgage deals and renewing deals thronetm

#1
I'm a first time buyer looking to buy a 130k house with 10% deposit. So the amount borrowing is £117k



As an example I have a quote from Santander of a fixed term deal.

2 year fixed rate

2.84%

£483 p/m

I have calculated that I will pay a total of £11 592 after the 24 months.



I have read some websites and they say to get a new deal before the current one expires, this prevents you being placed on the higher SVR. This makes sense to keep payments and interest rates at the lowest however I have also read that when you start a mortgage the repayments will be mainly interest.



Does this mean that each time I remortgage to get the best deals that I will only be mainly paying interest? If this is the case then surely this defeats the purpose of renewing a fixed term deal? Or is it only the first time you take out a mortgage that the repayments will be mainly interest i.e. the first 2 years?



If I have a 2 year fixed term deal @ 2.84% with monthly payments of £483, how much interest will have been paid over the two years?

Thanks

#2



I'm a first time buyer looking to buy a 130k house with 10% deposit. So the amount borrowing is £117k



As an example I have a quote from Santander of a fixed term deal.

2 year fixed rate

2.84%

£483 p/m

I have calculated that I will pay a total of £11 592 after the 24 months.



I have read some websites and they say to get a new deal before the current one expires, this prevents you being placed on the higher SVR. This makes sense to keep payments and interest rates at the lowest however I have also read that when you start a mortgage the repayments will be mainly interest.



Does this mean that each time I remortgage to get the best deals that I will only be mainly paying interest? If this is the case then surely this defeats the purpose of renewing a fixed term deal? Or is it only the first time you take out a mortgage that the repayments will be mainly interest i.e. the first 2 years?



If I have a 2 year fixed term deal @ 2.84% with monthly payments of £483, how much interest will have been paid over the two years?

Thanks
Originally posted by thronetm


You sound very confused....



It just means that whilst there are many years left on the term you will be paying more towards interest than capital. But the shorter your term the more of your payments are apportioned to repaying the capital rather than paying the interest. Overpaying just a small amount each month can really reduce the term quite dramatically.

#3
Confused is certainly what I am.

Being a first time buyer and having to research all this new information isn't how I WANT to spend my Sunday but needs must.



Ok so I understand.

My goal is to find the best fixed term deal, then a few months before it expires find the most current new best deal. Also I need to find how much I can overpay, as that is definitely something I would like to do as you mention it reduces the term and I'll repay the mortgage quicker.



Any other advice? Or any advice going against fixed terms?

Thanks in advance

#4
Don't think you have a choice but to have a fixed with that Loan To Value for a good rate. But if rates go higher in 2 years can you afford them?



If you have other more expensive debt pay that off before below.



More on overpayments. Is that a 30 year term? Can you afford more each month?

http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator



Above is a calculator to make you cry about how much you'll pay. So at this rate and term it'll be £174,027 over 25 it'll be £545 per month and a total of £163,590.

You don't have to go through affordability checks again, just overpay each month by £62 for same impact. If you are getting 1% cashback with 123 account put this in to repay £68 extra, this saves you 5 years 4 months and £11,256 in interest.

Try to overpay enough to get into next lower LTV band before next fix above £68 gets you below 85% which would be 1.74% fixed 2 years. (I just missed mine).



Ask advisor:

How much early repayment charges are each year, some reduce some don't.

how much you can overpay your mortgage by and is this total loan value (normally is).

How can you make overpayments? lump sum amount or smaller monthly?

#5
I can afford the rates if they go higher in two years. If that is the case tracker rates will surely go higher too so probably not have much choice. If I remortgage after two years for a better fixed rate deal (assuming rates do go up) then hopefully the inflation will be kept at a minimum.



It is based on a 30 year term and I can afford to pay potentially 100-150 more. Would you suggest I go for a 25 year term? What is the real benefit, less interest? Reducing term will need to factor in if I can afford extra if rates go up.



How did you calculate £174, 027? The rate of 2.84% is only for 2 years. The AVR is higher, in to the 3% bracket.



Thanks for the info on questions to ask. I am speaking with a handful of mortgage lenders over the next week. Some of the quotes on products I have been getting allow a 10% overpay per annum. I assume this is 10% of the loan value?

#6



I'm a first time buyer looking to buy a 130k house with 10% deposit. So the amount borrowing is £117k



As an example I have a quote from Santander of a fixed term deal.

2 year fixed rate

2.84%

£483 p/m

I have calculated that I will pay a total of £11 592 after the 24 months.



I have read some websites and they say to get a new deal before the current one expires, this prevents you being placed on the higher SVR. This makes sense to keep payments and interest rates at the lowest however I have also read that when you start a mortgage the repayments will be mainly interest.

Does this mean that each time I remortgage to get the best deals that I will only be mainly paying interest?



get this nonsense out of your head, old mortgage, new mortgage there is no difference



If this is the case then surely this defeats the purpose of renewing a fixed term deal? Or is it only the first time you take out a mortgage that the repayments will be mainly interest i.e. the first 2 years?



If I have a 2 year fixed term deal @ 2.84% with monthly payments of £483, how much interest will have been paid over the two years?

Thanks
Originally posted by thronetm


The amount of interest is based on the amount borrowed and the rate.

At the start you owe more so pay more interest.



the more you pay off the lower the interest you pay going forward.



there are 4 variable amount, rate, term and payment.



you only need 3 to work out the numbers, term sets the payment and once you have that you can ignore the term and just use the payment.





read up amortization.





Also ignore APR type number they are meaningless for mortgages



stick the payment into a calculator(interest only) and set term to 2 years.



£117,000 @ 2.84% £483pm 2years.



http://www.whatsthecost.com/mortgage.aspx



=>calculate=>

The bottom line, is that this interest only mortgage for £117,000.00, over 2 years, will cost you £483.00 a month.



In taking out this loan, you'll pay a total of £6,508.61 in interest. At the end of the mortgage terms, you'll still owe £111,916.61





look at the details to see how the payment pays of the capital and how much interest there is each month as the capital goes down.

#7
Thank you all for the comments.



I am now looking at 25 year deals. I can afford it so may aswell as I will be saving on interest.



I am planning on fixed term, undecided on 2, 3 or 5 year yet.

I do think the rates will go up so edging more towards 3 or 5 years fixed.



Some of the lenders allow 10% overpayments per year which is good. One lender does not allow any overpayments on fixed but I was told before the end of your fixed term deal tell the lender you want to pay off a lump sum of the capital before going in to a new deal and they will allow you to do that. This means you could just save a few quid monthly and then use that lump towards the end of the deal.

The only downside to that is with overpayments, you have the benefit in that your interest rates are recalculated either yearly or monthly depending on how often you overpay.

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