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2 year or 5 year fix - same rate

paulnumbers
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2 year or 5 year fix - same rate

#378533

Postby paulnumbers » January 19th, 2021, 10:22 am

So, not sure what to do here.

I’m remortgaging and have two options

1.09%, £999 fee, 2 year

1.24, £999 fee, 5 year

My decision in the past has always been simple, I’ll take whatever is the lowest IRR. What has thrown a spanner in the works is that they come out almost identical. Around about 1.36%

Is there a goos reason to choose a longer fix?

pro’s - some certainty, decent rate historically, having to pay a fee in 2 years is likely to impact the rate more as the loan will be lower

cons - erc’s for a longer time period, 5 years seems a long time, might want to move country

Can anyone convince me one way or the other?

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Re: 2 year or 5 year fix - same rate

#378565

Postby kempiejon » January 19th, 2021, 11:37 am

paulnumbers wrote:/
pro’s - some certainty, decent rate historically, having to pay a fee in 2 years is likely to impact the rate more as the loan will be lower

cons - erc’s for a longer time period, 5 years seems a long time, might want to move country

Can anyone convince me one way or the other?


Depending on how big the monthly payents are the fee to come in 2 year time might swing, if you mortgage is £3k per month £999 in 2 years won't fell half as bad as it ould if you monthly repayment was £300. I prefer a longer fix as it helps with budgeting but only if the saving is marginal.

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Re: 2 year or 5 year fix - same rate

#378599

Postby Gerry557 » January 19th, 2021, 2:14 pm

Personally unless there is a known reason for the shorter duration, which appears not or you wouldn't be asking, I would go for the longer term.

Fixed costs and no worries about what state things, including you, will be in for the next five years.

Check ability to over pay if required and early payment penalties.

Last thing you would want is to be in a position where you need to remortgage and your circumstances have changed detrimentally and you get stuck on svr

As for moving country, you can't cos of Brexit, unless you mean to an independent Scotland :D

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Re: 2 year or 5 year fix - same rate

#378610

Postby dealtn » January 19th, 2021, 3:25 pm

Gerry557 wrote:Personally unless there is a known reason for the shorter duration, which appears not or you wouldn't be asking, I would go for the longer term.

Fixed costs and no worries about what state things, including you, will be in for the next five years.

Check ability to over pay if required and early payment penalties.

Last thing you would want is to be in a position where you need to remortgage and your circumstances have changed detrimentally and you get stuck on svr

As for moving country, you can't cos of Brexit, unless you mean to an independent Scotland :D


But if he is looking to move country within 5 years there will likely be early repayment charges on the five year deal, but possibly not with the two year one if that has expired (depending on what he rolls it in to).

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Re: 2 year or 5 year fix - same rate

#378622

Postby paulnumbers » January 19th, 2021, 4:06 pm

kempiejon wrote:
paulnumbers wrote:/
pro’s - some certainty, decent rate historically, having to pay a fee in 2 years is likely to impact the rate more as the loan will be lower

cons - erc’s for a longer time period, 5 years seems a long time, might want to move country

Can anyone convince me one way or the other?


Depending on how big the monthly payents are the fee to come in 2 year time might swing, if you mortgage is £3k per month £999 in 2 years won't fell half as bad as it ould if you monthly repayment was £300. I prefer a longer fix as it helps with budgeting but only if the saving is marginal.


It really is astonishing close over the fixed period. I'm a little surprised the 5 year works out better.

2 year deal, IRR 1.3718%
5 year deal, IRR 1.3654%

Assuming I could get another 2 year fix at the same rate though in 2 years, given what I've paid off, the IRR would go upto something like 1.4454%, which over the following 2 years would cost me around £200 more.

So really, all things considered, the cost is broadly the same (but the 5 year is cheaper if rates stay the same)
Last edited by paulnumbers on January 19th, 2021, 4:09 pm, edited 1 time in total.

paulnumbers
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Re: 2 year or 5 year fix - same rate

#378625

Postby paulnumbers » January 19th, 2021, 4:08 pm

Gerry557 wrote:Personally unless there is a known reason for the shorter duration, which appears not or you wouldn't be asking, I would go for the longer term.

Fixed costs and no worries about what state things, including you, will be in for the next five years.

Check ability to over pay if required and early payment penalties.

Last thing you would want is to be in a position where you need to remortgage and your circumstances have changed detrimentally and you get stuck on svr

As for moving country, you can't cos of Brexit, unless you mean to an independent Scotland :D


Overpayment is 10% of the outstanding at the start of each year. But also interestingly, (Nationwide) I can change (ie potentially significantly shorten) the term at will once per year. So, depending on affordability checks, I have the ability to overpay that way too.

Fixed costs and no worries about what state things, including you, will be in for the next five years


It's a good point, it's easy to get bogged down in the details, and not think about what happens if I get knocked down by a bus,

Thanks for your comments.

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Re: 2 year or 5 year fix - same rate

#378781

Postby Gerry557 » January 20th, 2021, 8:52 am

I was thinking more of being unemployed/redundant or having to move to a lower paid job and thereby failing to be in criteria for a new mortgage in 2 years time.

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Re: 2 year or 5 year fix - same rate

#379892

Postby paulnumbers » January 23rd, 2021, 9:56 am

Gerry557 wrote:I was thinking more of being unemployed/redundant or having to move to a lower paid job and thereby failing to be in criteria for a new mortgage in 2 years time.


Is that a concern for most lenders? I've been surprised how easy switching is with Nationwide, no credit check, no affordability check, just go online and click a few buttons, and the job is done.

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Re: 2 year or 5 year fix - same rate

#379901

Postby dealtn » January 23rd, 2021, 10:40 am

paulnumbers wrote:
Gerry557 wrote:I was thinking more of being unemployed/redundant or having to move to a lower paid job and thereby failing to be in criteria for a new mortgage in 2 years time.


Is that a concern for most lenders? I've been surprised how easy switching is with Nationwide, no credit check, no affordability check, just go online and click a few buttons, and the job is done.


Yes.

Less so if you are happy to stick with your existing lender and potentially ignore 99% of the offers in the market.

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Re: 2 year or 5 year fix - same rate

#379904

Postby Howard » January 23rd, 2021, 10:55 am

paulnumbers wrote:
Gerry557 wrote:I was thinking more of being unemployed/redundant or having to move to a lower paid job and thereby failing to be in criteria for a new mortgage in 2 years time.


Is that a concern for most lenders? I've been surprised how easy switching is with Nationwide, no credit check, no affordability check, just go online and click a few buttons, and the job is done.


Forgive my curiosity. Are you saying that you can actually get a mortgage from Nationwide without a credit check? Or is it just a quote?

I ask because, as an investor, I remember how easy it was to get a mortgage from the likes of Northern Rock in around 2007 and that was one of the pointers indicating that the economy was about to nosedive. I'd be surprised if mortgage checks weren't quite stringent these days?

regards

Howard

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Re: 2 year or 5 year fix - same rate

#379905

Postby Gerry557 » January 23rd, 2021, 10:58 am

paulnumbers wrote:
Gerry557 wrote:I was thinking more of being unemployed/redundant or having to move to a lower paid job and thereby failing to be in criteria for a new mortgage in 2 years time.


Is that a concern for most lenders? I've been surprised how easy switching is with Nationwide, no credit check, no affordability check, just go online and click a few buttons, and the job is done.


If its that simple great, I haven't looked at nationwide mortgages but I do have a couple of their current accounts. If they have access, maybe they can see that you are fine. I would have thought that there would be some basic checks of affordability or they would come unstuck.

Will things be the same in two years who knows? I remember when they were giving mortgages away like sweets, pre 2008. Then "new rules" kicked in and it was much harder to "fit the criteria" hence all the "mortgage prisoners" we now have.

I even found myself on the wrong side of a mortgage application which I just wanted to roll over. Despite being fully offset and having additional savings/property I was told I couldn't afford it. I was working a lot less hours than when I first started it. The decider that made the process ok was saying "if the worst came to the worst I would sell the house!"

I was told that I didn't seemed concerned enough over how I could afford the monthly payments. I told them that the monthly amount was zero (fully offset) so yes I wasn't concerned if I could afford nothing at all! In the end the computer said yes but small insignificant details really mattered.

Changing a retirement date by a month!
Not counting foreign share savings as assets, UK ones were fine!
This confused me as a Fidelity South East Asia fund had to be ignored but Vodafone shares were OK. Obviously Vodafone is HQed in the UK but its an international company and most of its earning were from abroad it even pays in euros now! SEA paid in sterling.

I was even asked if I wanted to borrow more. I said OK and then after further questioning was told I couldnt have it and they wanted to know what I wanted the extra for. I replied cos you asked me? It was quite perplexing and the operator had to keep running off to check details with the supervisor. She wasnt sure If it would be ok to sell another property to pay off this mortgage, silly I know.

Still if there are no checks Bob's your uncle! better than going through all that rigmarole.

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Re: 2 year or 5 year fix - same rate

#380090

Postby paulnumbers » January 23rd, 2021, 8:38 pm

Howard wrote:
paulnumbers wrote:
Gerry557 wrote:I was thinking more of being unemployed/redundant or having to move to a lower paid job and thereby failing to be in criteria for a new mortgage in 2 years time.


Is that a concern for most lenders? I've been surprised how easy switching is with Nationwide, no credit check, no affordability check, just go online and click a few buttons, and the job is done.


Forgive my curiosity. Are you saying that you can actually get a mortgage from Nationwide without a credit check? Or is it just a quote?

I ask because, as an investor, I remember how easy it was to get a mortgage from the likes of Northern Rock in around 2007 and that was one of the pointers indicating that the economy was about to nosedive. I'd be surprised if mortgage checks weren't quite stringent these days?

regards

Howard


Sorry I probably should have been clearer. I'm just talking about a mortgage switch with the same lender (in my case, Nationwide). In that case, yes, there are seemingly no checks of any kind, other than of course, that you have a multi year period of doing exactly what you said you would do, ie, pay the mortgage ;-)

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Re: 2 year or 5 year fix - same rate

#380092

Postby paulnumbers » January 23rd, 2021, 8:50 pm

If its that simple great, I haven't looked at nationwide mortgages but I do have a couple of their current accounts. If they have access, maybe they can see that you are fine. I would have thought that there would be some basic checks of affordability or they would come unstuck.


I think if I were to try and reduce the term, and therefore increase payments, they would want to carry out their standard affordability check. Seemingly they are more concerned about the welfare of borrowers who intend to pay off debt faster than those that want to stretch it out.

Will things be the same in two years who knows? I remember when they were giving mortgages away like sweets, pre 2008. Then "new rules" kicked in and it was much harder to "fit the criteria" hence all the "mortgage prisoners" we now have.


Good point

I even found myself on the wrong side of a mortgage application which I just wanted to roll over. Despite being fully offset and having additional savings/property I was told I couldn't afford it. I was working a lot less hours than when I first started it. The decider that made the process ok was saying "if the worst came to the worst I would sell the house!"


Don't get me started on banks ;-) After 10 years as an IT contractor, bouncing from contract to contract, and having saved a 40% deposit, I assumed a reasonable lender would think "this chaps seems to know what he's doing, and he's got a large deposit". In fact, Halifax told me that to have a mortgage, I would need at least a month remaining on my contract. And given that I only ever get 3 month contracts, that means I would have needed to find out a house, and complete, all within a magic 8 week period. They will of course then give me a 30 year mortgage based on having 1 month contract left of work, but wouldn't if I have only 3 weeks left. Banks are seemingly run by morons, or at least people who can't think rationally around slightly unusual cases.

I was told that I didn't seemed concerned enough over how I could afford the monthly payments. I told them that the monthly amount was zero (fully offset) so yes I wasn't concerned if I could afford nothing at all! In the end the computer said yes but small insignificant details really mattered.


But surely the bank would like to see a certain look of terror in your eyes before you signed on the dotted line. :D

Still if there are no checks Bob's your uncle! better than going through all that rigmarole.


Well exactly, and it's for that reason that I'm highly likely to stay with my current lender, my circumstances are always slightly unusual, and it's just too difficult, or too annoying, trying to go through a real mortgage application. (I've given up with Coventry a couple of times for example)

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Re: 2 year or 5 year fix - same rate

#380169

Postby dealtn » January 24th, 2021, 10:01 am

paulnumbers wrote:Don't get me started on banks ;-) After 10 years as an IT contractor, bouncing from contract to contract, and having saved a 40% deposit, I assumed a reasonable lender would think "this chaps seems to know what he's doing, and he's got a large deposit". In fact, Halifax told me that to have a mortgage, I would need at least a month remaining on my contract. And given that I only ever get 3 month contracts, that means I would have needed to find out a house, and complete, all within a magic 8 week period. They will of course then give me a 30 year mortgage based on having 1 month contract left of work, but wouldn't if I have only 3 weeks left. Banks are seemingly run by morons, or at least people who can't think rationally around slightly unusual cases.



Banks are not run by morons.*

You are looking at a "non-vanilla" case going to a "vanilla" provider, and then wondering why you are not being offered the same product as "vanilla" customers.

Lloyds Banking Group, under who Halifax come, have multiple non-vanilla channels, and offerings, that will cover your scenario. The worst you can say is they failed to provide you with a route to speaking to them.

Financial products, and their providers, aren't radically different to other industries. If you have a vegan diet you can, I would think, feed yourself from supermarket visits, but might get a more tailored offering from a specialist provider. I am sure there are better analogies, but I am sure you get the idea.

*I have actually met a few personally and professionally. I wouldn't describe any as a moron, but a number I have had doubts about their thinking and abilities, though again I doubt that would be radically different from other Large Institutions.

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Re: 2 year or 5 year fix - same rate

#380238

Postby paulnumbers » January 24th, 2021, 12:25 pm

dealtn wrote:
paulnumbers wrote:Don't get me started on banks ;-) After 10 years as an IT contractor, bouncing from contract to contract, and having saved a 40% deposit, I assumed a reasonable lender would think "this chaps seems to know what he's doing, and he's got a large deposit". In fact, Halifax told me that to have a mortgage, I would need at least a month remaining on my contract. And given that I only ever get 3 month contracts, that means I would have needed to find out a house, and complete, all within a magic 8 week period. They will of course then give me a 30 year mortgage based on having 1 month contract left of work, but wouldn't if I have only 3 weeks left. Banks are seemingly run by morons, or at least people who can't think rationally around slightly unusual cases.



Banks are not run by morons.*

You are looking at a "non-vanilla" case going to a "vanilla" provider, and then wondering why you are not being offered the same product as "vanilla" customers.

Lloyds Banking Group, under who Halifax come, have multiple non-vanilla channels, and offerings, that will cover your scenario. The worst you can say is they failed to provide you with a route to speaking to them.

Financial products, and their providers, aren't radically different to other industries. If you have a vegan diet you can, I would think, feed yourself from supermarket visits, but might get a more tailored offering from a specialist provider. I am sure there are better analogies, but I am sure you get the idea.

*I have actually met a few personally and professionally. I wouldn't describe any as a moron, but a number I have had doubts about their thinking and abilities, though again I doubt that would be radically different from other Large Institutions.


I do take your point, but the product I was applying for via Halifax was a contractor mortgage. it's just the rules they have for their contractor mortgage are a little dim witted.

https://www.halifax-intermediaries.co.u ... px?isfad=0

Sub Contractors, Fixed/short term contracts and Agency workers: Applications will be considered from the above employment types if the customer has a current continuous employment of 12 months or more with 6 months of the contract remaining or the customer has 2 years continuous service in the same type of employment.

I recall now that although I had 10 years contracting, I'd had a long summer break 18 months earlier, so the "2 years continuous service" didn't count. Nonsense really, and a rational bank would have seen that I met the spirit of their rules if not the letter.

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Re: 2 year or 5 year fix - same rate

#380241

Postby dealtn » January 24th, 2021, 12:32 pm

paulnumbers wrote:
dealtn wrote:
paulnumbers wrote:Don't get me started on banks ;-) After 10 years as an IT contractor, bouncing from contract to contract, and having saved a 40% deposit, I assumed a reasonable lender would think "this chaps seems to know what he's doing, and he's got a large deposit". In fact, Halifax told me that to have a mortgage, I would need at least a month remaining on my contract. And given that I only ever get 3 month contracts, that means I would have needed to find out a house, and complete, all within a magic 8 week period. They will of course then give me a 30 year mortgage based on having 1 month contract left of work, but wouldn't if I have only 3 weeks left. Banks are seemingly run by morons, or at least people who can't think rationally around slightly unusual cases.



Banks are not run by morons.*

You are looking at a "non-vanilla" case going to a "vanilla" provider, and then wondering why you are not being offered the same product as "vanilla" customers.

Lloyds Banking Group, under who Halifax come, have multiple non-vanilla channels, and offerings, that will cover your scenario. The worst you can say is they failed to provide you with a route to speaking to them.

Financial products, and their providers, aren't radically different to other industries. If you have a vegan diet you can, I would think, feed yourself from supermarket visits, but might get a more tailored offering from a specialist provider. I am sure there are better analogies, but I am sure you get the idea.

*I have actually met a few personally and professionally. I wouldn't describe any as a moron, but a number I have had doubts about their thinking and abilities, though again I doubt that would be radically different from other Large Institutions.


I do take your point, but the product I was applying for via Halifax was a contractor mortgage. it's just the rules they have for their contractor mortgage are a little dim witted.

https://www.halifax-intermediaries.co.u ... px?isfad=0

Sub Contractors, Fixed/short term contracts and Agency workers: Applications will be considered from the above employment types if the customer has a current continuous employment of 12 months or more with 6 months of the contract remaining or the customer has 2 years continuous service in the same type of employment.

I recall now that although I had 10 years contracting, I'd had a long summer break 18 months earlier, so the "2 years continuous service" didn't count. Nonsense really, and a rational bank would have seen that I met the spirit of their rules if not the letter.


I sympathise, but a "rational" bank, also strips out a lot of the cost of providing staff to analyse such decisions. (I wasn't in residential mortgages, and only Retail banking for less than 2 years of my Bank employment).

The "big" providers like this have models similar to the old Tesco "build 'em high, sell 'em cheap" and benefit from being a mass, low margin provider. It suits a large part of the market, and their shareholders. The more you, or the product, strays from this it is either costlier, and/or requires more scrutiny. As a result it isn't a natural bedfellow of such business models. They should at least have provided you a route to a different product offered elsewhere within the Group though in my opinion.

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Re: 2 year or 5 year fix - same rate

#380251

Postby paulnumbers » January 24th, 2021, 12:55 pm

I sympathise, but a "rational" bank, also strips out a lot of the cost of providing staff to analyse such decisions. (I wasn't in residential mortgages, and only Retail banking for less than 2 years of my Bank employment).


That's a fair point.

On a half serious point, I mean no insult to the banking staff of Lloyds group, who I'm sure lead lives of blameless bourgeois domesticity


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