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baskey

Fixed Mortgage For 3 Yrs Vs 5yrs

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Hi all,

I am a FTB and totally new to mortgage processes. I choose to take interest only mortgage. Nationwide offers me 4.79% interest for 3 yrs of fixed term and as well as 5yrs for the same rate (Also i am getting still lower interest rate for 2 yrs fixed term but due to personal reasons i want to keep min of 3 yrs fixed rate). I am not planning to sell this house for another 5 yrs. In that case, i think to go for 5 yrs fixed term instead of 3 yrs. Will you people think, it is wise to go for 5 yrs fixed @4.79%?. Also it gives flexibility of paying capital upto 500 Pounds per month, if in case i want to reduce my capital during this fixd term.

Can you people share your opinion please? Also anyone knows, Banks that offers better quote than Nationwide's offer of above.

Thanks in advance.

Regards,

Baskey

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Hi all,

I am a FTB and totally new to mortgage processes. I choose to take interest only mortgage. Nationwide offers me 4.79% interest for 3 yrs of fixed term and as well as 5yrs for the same rate (Also i am getting still lower interest rate for 2 yrs fixed term but due to personal reasons i want to keep min of 3 yrs fixed rate). I am not planning to sell this house for another 5 yrs. In that case, i think to go for 5 yrs fixed term instead of 3 yrs. Will you people think, it is wise to go for 5 yrs fixed @4.79%?. Also it gives flexibility of paying capital upto 500 Pounds per month, if in case i want to reduce my capital during this fixd term.

Can you people share your opinion please? Also anyone knows, Banks that offers better quote than Nationwide's offer of above.

Thanks in advance.

Regards,

Baskey

I think interest only mortgages are rubbish. If you can afford get a repayment mortgage. www.Portman.co.uk offer 4.69 for 5 years fixed. As do yorkshire building society.

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I dont get them IO mortgages.

You owe the full amount you borrow at the end of the mortgage.

Some bloke said to me "you get another mortgage".. well thats stupid you have effectively had a 50 year mortgage.

His other snipet of genious was "the house will go up in value so you sell it."

Well lets say it doubles in value, at the end of the mortgage you have 200 grand and give the bank their 100 grand... then what?

Every other house will have gone up the same percentage so you can only buy a house thats half as good as the one you just sold. If there are any. If you only had a terraced in the first place then the only option is a tent. Or borrow another 100 grand and hey presto your back to your 50 year mortgage.

Am I missing something?

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I dont get them IO mortgages.

You owe the full amount you borrow at the end of the mortgage.

Some bloke said to me "you get another mortgage".. well thats stupid you have effectively had a 50 year mortgage.

His other snipet of genious was "the house will go up in value so you sell it."

Well lets say it doubles in value, at the end of the mortgage you have 200 grand and give the bank their 100 grand... then what?

Every other house will have gone up the same percentage so you can only buy a house thats half as good as the one you just sold. If there are any. If you only had a terraced in the first place then the only option is a tent. Or borrow another 100 grand and hey presto your back to your 50 year mortgage.

Am I missing something?

Hi Nelly,

Thanks for the answer. But IO also gives the flexibility of repaying capital upto 10% per annum. So it gives better flexibility than repayment. If one wants to reduce the capital can easily do so... Thats why i liked IO mortgages also, it keeps monthly commitments low for a fixed period.

IS there any thing wrong in my understanding?

Thanks,

Baskey

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you can get quite good rates on repayment fixed rate mortgages, with full flexibility i.e. no cap on the capital repayments monthly or annually.

I also don't like IO mortgages although they have their advantages if BTL.

If owner-occupied residential, then I believe repayment is the way to go, UNLESS you are strapped for cash for the next couple of years, but are confidently expecting good payrises in the next few years and plan to switch to capital repayment.

Alot of people slate IO mortgages saying there will be the full capital to pay off at the end of the term. Of course, given you are highly likely to switch mortgages thoughout the standard 25 years, this is only true if you only ever take out IO mortgages.

edited to add: para 3 is written independent of HPC scenarios!

Edited by xian

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well make sure you do thats all. I just know people have a habbit of expanding their life-style to the money they have. And they often go quite beyond the money they have..... as credit cards prove.

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Hi Baskey,

I would really recommend that you do some research. There have been some excellent threads on this site regarding the property market in general.

If you either don't have time (or can't be @rsed ;) ) to do the research, my 2p is to forget about IO mortgages. I understand fully your point that it gives "flexibility with capital repayment" - but if you want to repay the capital get a repayment mortgage - duh! There are many flexible repayment mortgages available...

You also mentioned that you intend to keep the house for 5 years. When you come to sell it you might be in for a little surprise! The clue could be in the website name.

Why don't you rent and see what happens and then buy something better in a couple of years time?

Good luck with whatever you decide to do.

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If you are thinking of an IO mortgage. It would be cheaper to rent of a landlord than the bank (plus the landlord has to pay the maintence and take the risk). And it a lots easier to move when renting. And the extra money you can put in a savings account!

renting is far better than IO mortgage at the moment.

Edited by Hairlocks

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If you are thinking of an IO mortgage. It would be cheaper to rent of a landlord than the bank (plus the landlord has to pay the maintence and take the risk). And it a lots easier to move when renting. And the extra money you can put in a savings account!

renting is far better than IO mortgage at the moment.

Why?

Renting may be cheaper but you have the insecurity of moving everytime the LL decides to sell/decorate/move his sister in etc etc.

At least with an IO mortgage (renting off the bank) you have security. They can only throw you out if you don't pay the mortgage.

You also have the posibility that house prices will go up over the length of the mortgage (say...25 years)

I don't like interest only mortgages - I wish that hosue prices were based on what people could afford not what debt they are prepared to get into. But the reality is that the housing market has changed and I am not sure that an IO mortgage is any worse than renting of a landlord.

Of course al this doesn't take into account that house prices could drop in the next few years - that is a different matter.

I am coming round to the idea of IO mortgages. Both me and my partner will see our wages rise in the next couple of years so It may be a possible option for us.

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Doing a bit of research on the movativations of the landlord, which helps on the security side. Most landlords in it as a business are greatful for tenanets at the moment.

I am not sure what moving house has to do with security though, waste of some time and a small amount of money, but not risk.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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