# Mortgage - Fix 3 or 5 years?



## Alex_225 (Feb 7, 2008)

I'm in the process of setting up a new mortgage and been offered some cracking rates. 

Just wanted some opiniond from those a bit more clued up than I am on this kind of thing. 

I've been offered a 5 year fixed rate of 2.29% and a 3 year fixed rate of 1.79%. The difference in monthly payments is pretty much £50 per month. But even at the higher rate it's about £200 a month less than I'm paying at the moment. 

I'm tempted by the 5 year fixed purely as it gives me that much time knowing my repayments won't change for some time. That said though, I fund the house on my own (at the moment) so I do have to keep an eye on outgoings more than I had to living with my ex so £250 a month cheaper is a nice prospect.

Thing I'm concerned about is whether the rates will shoot up in 3 years time so that £50 I save a month now may be false economy in 3 years time. 

Any thoughts lovely DW chums. :lol:


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## Dannbodge (Sep 26, 2010)

Imo I would fix for the longest period possible asI like the stability of knowing what I have to pay each month.

It's a gamble either way though


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## Alex_225 (Feb 7, 2008)

Yes, that's my thinking as I will know for the next 5 years that I will be paying X amount per month. Also, I am planning for my girlfriend to move in with me so we will split bills but not the mortgage costs so at least there's 5 years living together before contemplating a mortgage together (and making sure she's not a mental case! haha)

Another thing I guess is that if the rate shoots up after 3 years, I could end up paying £200 per month more again which makes £50 a month more a lot more appealing.


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## dendass (Feb 11, 2015)

Hi mate,
I cant advise you without knowing your circumstances, but I am a financial adviser.
Put it this way... most of my clients I deal with we discuss the pro's and cons of fixing for 2/3 years vs 5. I always say to them that if the reassurance of knowing what you are going to pay for the next 5 years is a good feeling (as oppossed to stressing what rates will do in 3 years), then go for it. Yes, you might save a little by doing it for 3 years, but you will have the hassle of remortgaging, proving income, paying any fees etc again in 3 years.

I tend to see either 2 year deals - super cheap, or 5 year deals for security - I havent done a 3 year deal for a long time.

Hope that give you some thoughts.


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## dendass (Feb 11, 2015)

Alex_225 said:


> Yes, that's my thinking as I will know for the next 5 years that I will be paying X amount per month. Also, I am planning for my girlfriend to move in with me so we will split bills but not the mortgage costs so at least there's 5 years living together before contemplating a mortgage together (and making sure she's not a mental case! haha)
> 
> *Another thing I guess is that if the rate shoots up after 3 years, I could end up paying £200 per month more again which makes £50 a month more a lot more appealing.*


This bit makes me thing 5 year defo way to go for you!


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## Deathstar (Jan 13, 2013)

For me it has to be the 5 years option. That way you have piece of mind for a while longer. 
The other option is capped, as there is still a potential that the base rate may drop to 0.25 if inflation carries on shrinking.


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## Alex_225 (Feb 7, 2008)

Thank you mate, that's really handy to know. 

Circumstances wise I'm in a good position in that I own a third of the property but due to work I've had done the value has shot up meaning I actuall only need to get a 60% mortgage. Have been paying £850 a month but due to the fixed rate ending it's gone up to £950. If I fix at the current rates for 5 years it'll drop by £200 or if I fix for 3 it'll drop by £250!


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## robertdon777 (Nov 3, 2005)

Fix for 5 sit back and relax....get a new dolly bird in and get her to fund your bad habits.


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## Wrigit (May 2, 2007)

Just gone through the same dilemma about 16 months ago, For me it depends if you have any plans to sell up in the next few years.

If not go for the longest term you feel comfortable with, as the market is only slowly going up.

daft question are you re-mortgaging with the same bank or are you in the open market as it really paid to shop around or us. we only saved around £70 a month but we are now reducing the mortgage value at a much faster rate compared to the old mortgage i had.


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## Alex_225 (Feb 7, 2008)

Going with a new lender. I was put in touch with a finanancial adviser who gets access to some better deals than I'd probably find. Was with Santander but haven't found them overly helpful really.

I'd be happy paying a fee for someone to can do all the leg work for me and get me a better deal. I think 5 years is going to be a winner for me. 



robertdon777 said:


> Fix for 5 sit back and relax....get a new dolly bird in and get her to fund your bad habits.


Or at least incorporate her into my bad habits hahaha.

Thing is the plan is she'll move in but I'll pay the mortgage as it's my place. In future we'll either get a joint mortgage or she'll get her own mortgage on a place to let as she saves like a nutter anyway.


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## Andyg_TSi (Sep 6, 2013)

Hi,

Just a bit of thing to watch for:

Fixing for 2 or 3 years - what is the variable rate on these offers once the fixed rate period is up? - yes you can get some cracking rates, EG 'fixed' at 1.XX% for 2-3 years, but then it shoots up to 'say' 4.8% variable, - you will then have to remortage again for another fixed rate. If you don't mind shopping about and want to take advantage of lower rates as they are offered, then fix for a shorter period, but be prepared to shop around again in 2-3 years time

5 year fixed - Yes, over the longer term, there is security in knowing what your payments will be for 5 years, but, you'll be kicking yourself if rates fall even lower in 2 - 3 years time, when you 'could' be taking advantage of another lower fixed rate deal, if the mortgage market remains competitive with lenders offering low rates.

What are the terms of the mortgage during the fixed rate period regarding overpayments? - can you make any or are you tied in & face penalties? - something to consider, which leads on to;

Do you have any savings at present?? - savings rates are generally pants at the minute, so if you have a good lump sum saved, then put this towards the mortage, there's is no point earning 0.5% interest on savings, when your paying 2 -3% on your mortgage, pay down the debt and save money.

Are you planning on saving the difference between what your paying now & what your payments will be over the period of your new fixed mortgage period?, then fix for 3 years & then pay a lump sum off the mortgage when the fixed period ends & remortgage for a lower amount & pay off your mortgage earlier - EG if you can save £200 a month for 3 years then that's £200 x 36 = £5,200, so in 3 years time, you could pay off another £5K

I'm on my lenders standard variable rate at 2.5% & it works out that I pay roughly £5.40 per month for every £1K borrowed on the mortgate. I've just paid £23K off my mortgage & my payments have reduced from £498 (£91K owing) to £364 per month (£68K owing)


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## Wrigit (May 2, 2007)

The whole better deals thing i feel dubious about as i have paid a so called mortgage adviser a fee and i got a crap deal on my first mortgage.

Then i went with a finance company and they offered a few deals but i manged to find a better deal myself with no fee's and £250 paid to me!! (barclays at the time).

Although it feels a scary thing to do (well to me it was!!) it really is worth booking a day off and visiting banks direct seeing what they can do for you.


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## alan hanson (May 21, 2008)

We've just had our mortgage areed and went for 5 years we could have ported over an existing one at 2.5 on a percentage of what we wanted but the saving isnt much a month and decided like you knowing whats coming out and not having to worry ref increases wasnt worth it, theres some good rates around


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## MDC250 (Jan 4, 2014)

Look at the overall cost for each period. Lower rates on a shorter fix look great but what about fees, conveyancing costs etc? A lot of fees have gone through the roof since I last fixed, banks are never out of pocket!


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## dendass (Feb 11, 2015)

Not sure if it's in rules and mod remove if I'm stepping a line, but Alex if you want to pm me some details I will happily drop details into our research tool and give you an idea of who's best to go with in the market currently.


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## Bazza85 (Mar 14, 2015)

I've recently seen a mortgage advisor as my house is on the market. 
Due to where I work I'm on nice money now, but may dry up in a few years (power industry) so I've even looked at 10yrs fixed as mine would be a BIG mortgage to me 
Think it was nationwide do a 10yr fixed rate, but you can opt out at 5yrs with no penalty. 
Although when I did the math for my circumstances, I'm better going for a 5yr fixed (bank of Coventry were best for me, I'd never even heard of them) and could overpay the £100 difference between that & the nationwide deal and knock over 5yrs off my mortgage term anyway. 
Lottery lol, go with your gut


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## B17BLG (Jun 26, 2012)

alan hanson said:


> We've just had our mortgage areed and went for 5 years we could have ported over an existing one at 2.5 on a percentage of what we wanted but the saving isnt much a month and decided like you knowing whats coming out and not having to worry ref increases wasnt worth it, theres some good rates around


This

We did our mortgage 2 years ago. We did exactly the same. Find a deal that's affordable and fixed that your happy with, happy in the knowledge that your payments are in hand and nothing will change and you remain happy for that term.

There is probably always a cheaper deal out there or a better incentive. Be happy with what you agree and enjoy your home.


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## Maggi200 (Aug 21, 2009)

I'd be tempted to take the lower rate and put the extra £50 towards capital repayments...

Even when the interest rates do shoot back up you'll be borrowing less.


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## bigbadjay (May 29, 2012)

Alrite Andy mate, are you in the mortgage game as a profession?


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## Andyg_TSi (Sep 6, 2013)

bigbadjay said:


> Alrite Andy mate, are you in the mortgage game as a profession?


Alright mate,

Nah, I'm not in the mortgage game as a profession, but just passing on info that I've gained from elsewhere and learned over the years.


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## RaceGlazer (Jan 10, 2007)

We were in the same position when we moved in Jan.

Our simple clincher was - the rates cant go down much but they can go up a hell of a lot.

A small possible extra payment is good value insurance.

Fix as long as you can.


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## RedUntilDead (Feb 10, 2009)

slightly off topic, but if your thinking that your home is safe (and yours only) after five years of you paying a mortgage on your own and splitting the living costs with a live in partner, then think again. Its not that simple.She will have entitlements if the relationship goes pear shaped.


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## Alex_225 (Feb 7, 2008)

Yeah I am aware of that although not massively informed on the subject.

Although i have no intention of taking rent from her I am aware of some entitlement after a certain time.


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## ardandy (Aug 18, 2006)

If you overpay by £50 a month for 3 years wouldn't that possibly save you more (as you're borrowing less) in 3 years time when renegotiating than having a fixed deal for another 2 years?

Has anyone done these calculations?

Our plan is to keep paying what we are at the mo and drop to the lowest 2 or 5 year so we can overpay. Overpaying is surely the easiest way of saving considerable interest?


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## alan hanson (May 21, 2008)

Depends on the amount owed if your mortgage is for 250k plus say 50 squid a month wont touch any interest 3 years 1500 pound is nothing, increments of 5% usually give good savings which 50 wont touch but again dependant on amount borrowed i guess


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## Tricky Red (Mar 3, 2007)

If you have some savings, you might want to offset them against your mortgage. 

We did this in 2006 and have saved a few years on our mortgage. 

Check out offset mortgages. They are linked to variable rates, but we took ours out when rates were 0.75% above base rate (c 5.00%) and we have been really fortunate that rates have also fallen yet we have kept our repayments at the 5% level. No penalties etc


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## alan hanson (May 21, 2008)

some companies only allow you to over pay by so much also


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## Tricky Red (Mar 3, 2007)

alan hanson said:


> some companies only allow you to over pay by so much also


I agree. Our old Northern Rock would only allow us to overpay 10% of the yearly repayments per year. Our offset allows us to pay off whatever, whenever.


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## 20vKarlos (Aug 8, 2009)

I'd just like to thank everybody for their replies! 

I've learned a fair amount of things from this thread that might seem like a normal thing to those with a mortgage, but for me, being a novice and never had one, this has been rather interesting :thumb:


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## Alex_225 (Feb 7, 2008)

Likewise for me, a big thanks everyone. 

I'm going to go for a 5 year fixed but looks like there's a high probably of a sub 2%, fixed rate so will see as of Tuesday!


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