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Is a 5-year mortgage risky in the current market?


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Hi,

I'm looking to remortgage a property and put it on a B2L (it's currently renting but with Consent to Let and the fixed term is almost up). My broker has come back with options and said that based on current valuations and other variants, my best option is a 5-year fixed. However, with the market currently booming, and Rob & Rob backing Fred Harrison's thoughts that the boom will last another 5-6 years before we see a crash, I'm a little worried that I will be in a really difficult place by the time a 5-year fixed ends. I would definitely feel more comfortable on a 2-year (plus I could very likely remove more equity after 24 months). 

If I go on a 5-year fixed now, I can remove 5k equity. If I opt for a 2-year, I won't be able to remove any equity. - This is based on the valuation from NatWest coming out 15K LOWER than I had predicted (it's a new build and no-one has resold yet since they were built 5 years ago so values are hard to judge from 'recently sold' prices. 

 

Thanks for any ideas or advice on 2yr vs 5yr. 

 

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I would be a picking a 5 yr now - rates are lower than they have ever been and there is really only one way to go from here and that's up. Also, every time you remortgage you have to pay the booking fee so doing it once saves that. It does prevent you taking more money out but realistically how much could you take out in 2 years? After 5 the equity might be worth taking it out.

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I agree with Julia, once you've had to pay all the finance costs, broker fees and possibly solicitor fees there probably isn't much left. So go for a 5yr fix. 

Also, you may find that a 5yr fix takes you over a bad period for prices. 

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What I’ll say is more likely you will look back in 5 years I think you should have done x y and z which ever you choose. I fixed into 5 years on one property last year , good rate, right move. Also fixed into another property last year5 years, good rate, now I want to remortgage that at the early repayment fees are massive.

I went long due to COVID and concerns about interest rates and the market. 
 

flip side is if I had gone 2 years and the market was on its backside I would have wished I did 5 years .

do what makes sense at the time with the foresight you have. If things change , which they will, then so be it and just work with it. 5 years is gaurenteed rate, at least then it’s your choice to change / remortgage / pay fees etc before it  

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On 9/17/2021 at 5:11 AM, PoalaMCR said:

Hi,

I'm looking to remortgage a property and put it on a B2L (it's currently renting but with Consent to Let and the fixed term is almost up). My broker has come back with options and said that based on current valuations and other variants, my best option is a 5-year fixed. However, with the market currently booming, and Rob & Rob backing Fred Harrison's thoughts that the boom will last another 5-6 years before we see a crash, I'm a little worried that I will be in a really difficult place by the time a 5-year fixed ends. I would definitely feel more comfortable on a 2-year (plus I could very likely remove more equity after 24 months). 

 

 

Mortgages are always stressful, so if you can remortgage less often, I would definitely do that. Also, there are options to take equity out of your portfolio before your fixed rate ends

  • Further Advance from your lender
  • 2nd charge mortgages

I honestly wouldn't worry if there is a recession or not in 5 years. The mortgage market won't shut down completely. I bought one property and refinanced another during the pandemic. The rates weren't the best, but I got the deals done
 

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Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

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