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  • Mortgages & Finance

    Mortgage 5 or 10 year fixed

    Hi Guys,

    I have just had a offer accepted on a property in with a sale price £221,500 - I am going to purchase it using a limited co (first time I have done this).

    At the moment I am just trying to make up my mind as to whether I should go for a 5 year or a 10 year fixed.

    I am 37 years old and would like to buy more properties but worried about sudden interest rate hikes in the long term which is why I am leaning towards a 10 year fixed. From initial inquiries, I can get 3.85% rate on a 5 year fixed (with no fee) or a 4.43 on a 10 year fixed (£1400 fee), unfortunately it does not seem like any have the 10% overpayment per year which most standard buy to let mortgages have. I will be looking at taking out a loan of £100,000 on this property.

    At the moment, I have one other btl and will after purchasing this one, will have enough savings to buy another in 12 months.

    Was hoping to get an opinion from others, does it make sense to go for the 10 year fixed on a limited go?

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    Hi Gerthard,

    I am a mortgage broker, on the basis you are looking to purchase more properties and build a portfolio I would only ever go with a 5 year fixed rate as you may want to release equity in the future and avoid paying early redemption penalties on a 10 year deal. I have several clients who after 5 years want to go again and buy more properties which the 5 year allows. It does however sound like you can build funds rather quickly anyway so if you are going to just forget about this one and don't need to release equity then worth considering but I always think 10 years in investments is too long to be tied in.

    The 3.85% you mentioned is very competitive particularly with the no arrangement fee and free valuation.

    (*Moderator note: Contact details removed as member still on probation*).

    All the best, Gary

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    Thanks, Gary.

    Main concern is that interest rates go up over time, but I guess it is unlikely to happen suddenly so could make allowance for it overtime.

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    Hi Gerhard,

    The rate is good , who is the lender?  Is it precise or kent reliance ?

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    It is with Paragon but I am putting down over 40% deposit

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    5 year for me as long as the redemption penalties are affordable

    I took out many of these which offer stability but opportunities

    10 years fixes were not around though then but I doubt I would have gone for those as I was expanding

    More likely to do so now but I`ve stopped borrowing to buy more so 10 year is quite attractive

    If you want to buy more  though then 10 years is a very  long time to tie yourself in at this stage

    Also personal  lives can be turned upside down unexpectedly within a year so factor that in

    Why focus on 10% over payments if you are planning to buy more

    Borrowing more to buy more and paying down to pay off debt are counter intuitive I feel

    When you have a defined strategy for the next 20 years the answer will become clear



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    Jonathan Clarke. http://www.buytoletmk.com

    Thanks for the advice. I am in the process of moving ahead with a 5 year fixed now.

    The best one on the market was with Foundation - not sure if anyone has used them in the past? Apparently they are quite slow but their rate is very reasonable at 3.25% with a 2k arrangement fee for a limited co mortgage on a 5 year fixed.

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    I use Foundation for my first company purchase. When we found an error in the valuation they got me a new offer in 2 days so I think they are reasonably quick. They solicitors they appointed where terribly slow,  When I tried to make my second purchase I gave up on them after 9 months. I will not deal with those solicitors again.

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    OK, thanks Peter. I have decided to make use of L&C who found a better deal with Paragon so will be using their solicitors.

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