Mortgage fix, 2 or 5 years, WWYD?

[TheCyclingProgrammer]

Simple question: our 2 year fix expires at the end of March. Current lender valuation was good but not as good as estate agent valuation and not quite enough to get us over the 65% threshold (it's about 67% LTV) that we would have needed for a 5 year fix at 1.85% with a £999 fee.

From the range of 65-75% deals available to us our broker has found the best 2 year fix of 1.69% with no fees apart from the broker fees with Accord or 2.14% fix for 5 years with £999 fee.

Choices are: take the 5 year fix now or take the 2 year fix with no fees which will get us down to around 62% LTV at today's valuation by the end of the deal and then assuming the base rate hasn't moved much get a much better 5 year fix.

A few rough calculations suggest the base rate would have to go no higher than 1% after 2 years for the 2 year deal to be the best option but that does assume that 5 year fixed rates would move broadly in line with the base rate.

Also need to consider that the deal would end in Mar 2019 right on top of the expected Brexit. No idea how that influences things.

I have looked at tracker rates and overpaying to try and get the balance down quicker and moving onto a 5 year fix but the good tracker rates tend to have high fees that make it not worth it for such a short period.

What would you do?

[northernladuk]

I just went for the lowest tracker I could and then overpaid the amount it would have cost me if I'd gone for the fixed. That way I'm paying the lowest possible and the extra is helping to offset what I might lose if the rate changes and the fixed was better if that makes sense. I've done that all along so think I'll be ahead even if the rates change sometime down the line. Bit of a gamble but the numbers aren't big enough to really be a problem if they do change a little.

It might work out well that I've reached the next LTV break faster so can take advantage of that as well but that will just be a lucky addition rather than a plan.

As you say though, we are approaching some unknown times so now might be the time I ought to be looking at fixing... I might need to have a look at all this again soon.

[chopper]

Are you in a position to make an overpayment to get you to the 65% LTV per the lender's estimated valuation (which will just be an index linked price based on their last valuation), or maybe if you are confident their estimated valuation is wrong, can you pay them some money to get a fresh valuation?

Or remortgage with a new provider, who will do a fresh valuation.

If neither, I'd take the 2 year fix (interest rates aren't going to go up noticably in the next 2 years) but make overpayments to the tune of the difference between the 2 year and 5 year monthlies. No point taking the 5 year fix if you are reasonably near an LTV boundary.

[TheCyclingProgrammer]

No we aren't and it's not an index linked valuation, it's a surveyors valuation. Estate agents valued at £375-400k, index linked valuation was £343k and their online valuation was £365k. They agreed to send a surveyor to account for improvements made and it was valued at £360k which is the one they will use. The survey was free.

We could chance another lender and put forward a value of £370k but broker doesn't think it's worth it. We don't have a spare £10k unfortunately.

We did intend to continue paying what we do now effectively making an overpayment. The 2 year monthly payment is about £90 lower than what we pay now and the 5 year deal about £43 lower.

[ChimpMaster]

I am going through the same pain of thought (yes, not train) and have looked at so many options that it's done my head in. Eventually I hit the point where a few £ here or there wasn't going to kill me over a 2 year (or however long) term.

I've decided to commit to a 5 year fixed offset mortgage. The rate is OK, well great on a historical scale, and the offset will allow me to drill away at loan quicker that I would be able to do otherwise. The way I look at it, with an offset mortgage, the rate becomes less important IF you can build up a reasonable lump of savings in the account. I'm looking to MVL in a year anywhere so that lump sum will help me in this regard.

Shame that you've just missed out on the 65% though. I don't suppose you'd consider a director's loan to make up the numbers? Or if you go for a survey with another lender, have lots of evidence put forward to justify your £370k figure, especially recent local sales comparables and costs of work you have done on the home. Surveyors hate to be proven wrong so will never change their mind after they have come to a number, but they can be swayed beforehand.

[TheCyclingProgrammer]

Unfortunately I've got a director's loan earmarked for funding a garden office.

The 2.14% rate was with Nationwide. I have thought about putting through an application with a value of £370k and seeing what happens. At worst computer says no and we fall back to the higher rate. 2.14% over 5 years is certainly not a bad rate. Considering when we bought the house 2 years ago our LTV was 83% we aren't doing badly. They also have a 3 year fix at 1.74% at 70% LTV.

I don't think Nationwide so 65% deals though, their next level is 60%. Will speak to the broker.

[WTFH]

No we aren't and it's not an index linked valuation, it's a surveyors valuation. Estate agents valued at £375-400k, index linked valuation was £343k and their online valuation was £365k. They agreed to send a surveyor to account for improvements made and it was valued at £360k which is the one they will use. The survey was free.

We could chance another lender and put forward a value of £370k but broker doesn't think it's worth it. We don't have a spare £10k unfortunately.

We did intend to continue paying what we do now effectively making an overpayment. The 2 year monthly payment is about £90 lower than what we pay now and the 5 year deal about £43 lower.

Maybe I'm reading this wrong but if you're wanting to get the LTV down, then you want a lower valuation, not a higher one.

[vwdan]

I'd always go for 5 years but that's just because I'd choose stability over almost anything else for things like that.

[SueEllen]

Maybe I'm reading this wrong but if you're wanting to get the LTV down, then you want a lower valuation, not a higher one.

Yes you are reading it wrong.

[TheCyclingProgrammer]

Maybe I'm reading this wrong but if you're wanting to get the LTV down, then you want a lower valuation, not a higher one.

Higher value = lower LTV.

At £360k our LTV is just under 67%. At £370k it's just under 65%.