I’m about to lock in a mortgage for my SPV (Limited Co) and am torn on the term length.
I know the 5-year fix is usually standard to maximize borrowing capacity on the stress tests and spread out the product fees. However, with the potential for rates to drop further, I’m hesitant to lock in for that long.
Is anyone here currently opting for 2-year fixes to try and catch lower rates soon, or is the consensus still to stick with 5 years for the stability and leverage?
Keen to hear what strategies others are using right now.
Depends on size of fees doesnt it. Assuming you would have to pay two lots of fees say instead of one. Then in years 3-5 work out how much cheaper the monthly payment would neeed to be to cover the extra set of fees. Then (using a mortgage calculator) how much lower the interest rate will need to be for that reduction in the monthly rent to happen. If you are confident interest rates will fall enough then the 2 year deal makes sense.
That Ignores the hassle and uncertainty of having to do the mortgage application twice of course. If you’ve ever had problems just do it once. If doing the 2 year with the fall you actually expect in interest rates doesnt save you much also may not be worth bothering
Its really exactly the same principle as what you do (in your own place not tenant’s! ) when choosing a short or long fixed deal with your energy supplier or your.broadband
(From an economics perspective you would also theoretically allow for effects of time preference ie 100 quid now is worth more than 100 quid in a year’s time)