... then no one should pay back in full. Instead they should leave a £1 balance and check that they are only charged interest on that. I suspect that most customers wouldn't notice if they paid a few hundred extra one month and then got charged interest on what had been paid back but it would be obvious if only £1 was left outstanding.

Personally I would want to see it clearly stated in writing that interest would be calculated only on the outstanding balance rather than on the original loan before taking any chances. Overpayments allowed "without penalty" to me means that interest would be charged on the outstanding balance but I still don't know if that is what it means to Northern Rock or "qualified people".

In practice, you would need to check the interest calculations very carefully. I know situations where some organisations offer deals with "no fees" but they charge a percentage justified on the grounds that it is something other than a fee (it is common with currency exchange).

I can't see how they can make such a deal work unless they charged somewhere. It doesn't tally that they would charge one customer £3000 and another customer 5p per year for 3 years (or whatever the figures are) for doing virtually the same thing.

maxsteam:

MortgageSpecialist:

the Northern Rock deal I spoke about allow unlimited overpayments with a penalty only applying for full settlement.

That is interesting. It's normal for a hefty fee to be charged when you settle a fixed rate deal early in full but are you saying that, if you pay off everything but £1, there will be no fee and interest will be charged only on the £1 balance?

In theory yes (this is what a mortgage adviser at the Chelsea told me when I was enquiring about remortgaging a few months ago). Having said that, I'm surprised the threshold wasn't higher than £1 as surely it would cost the lenders more to collect the payment than they would receive in interest?

MortgageSpecialist:

the Northern Rock deal I spoke about allow unlimited overpayments with a penalty only applying for full settlement.

That is interesting. It's normal for a hefty fee to be charged when you settle a fixed rate deal early in full but are you saying that, if you pay off everything but £1, there will be no fee and interest will be charged only on the £1 balance?

Almost every mortgage will allow up to 10% overpayments without penalty regardless of the type, and the Northern Rock deal I spoke about allow unlimited overpayments with a penalty only applying for full settlement.

Mortgage advice is best given by qualified people, I find.

The main thing in your situation is to make sure that, whichever mortgage deal you go for, you can overpay without penalty. Most (all, I think?) fixed rate deals will penalise you if you overpay at any time other than renewal time. Some variable rate mortgage deals will also charge but there are also many variable rate mortgages where you can overpay without charges or penalties. You need to check the details of the mortgages that you are looking at.

If you are wanting some furniture quickly and cheaply, you could do worse than visiting your local house clearance auction and hiring a van.

Clarence:

Thanks for finding them deals. I have such a large deposit because I have saved for years, easily to find out from checking my isa's and savings account, plus I am in my late '30's. I have no furniture as I have split with my girlfriend, but rather than paying a lesser deposit my parents have lent me some money to buy some.

So to sum up, you are saying to go with The Woolwich on a 2 year tracker (as interest rates are so low) I will massively overpay, then maybe switch to a fixed rate afterwards as interest rates rise so I will have the security of knowing each month the payments. As I said before I hope to pay off the mortgage asap, hopefully 8 years.

The Woolwich deal is a lifetime tracker as opposed to a 2-year one. I'll explain. The Northern Rock equivalent, for example, is a two-year tracker at 2.59%. This is Bank Bae Rate +2.09% for two years. It then reverts to NRock's SVR which is currently 4.79%. The Woolwich deal is a lifetime tracker at 3.19% currently. That's BBR + 2.69% for the whole life of the mortgage. The only thing that is "2-years" about it is that you would have to pay an early redemption charge if you were to clear it within the first two years. There are no added fees on this deal. If you were borrowing in excess of £85,000 you would be better off with the NRock deal with the £595 arrangement fee, as the lower rate would offset the fee. For borrowing such a small amount, you would be better off with Woolwich's fee-free 3.19% option.

And yes, quite right, it would be beneficial to pay off as much as possible, then in a couple of years (at the end of any penalty period) grab a 5-year fixed rate (I anticipate you should be able to get one of these at around 3.5% at the time) and you should be set for the long term.

The deals quoted, incidentally, are those available to us professionals as mortgage advisers. They may or may not exist if you go to the lenders directly.

EDIT - just checked Woolwich website for direct deals - this one is avaiable direct to them also. Without going through all of your affordability, circumstances and profile, I would go with that deal at 3.19% on a lifetime tracker with 2-year tie-ins.

Thanks for finding them deals. I have such a large deposit because I have saved for years, easily to find out from checking my isa's and savings account, plus I am in my late '30's. I have no furniture as I have split with my girlfriend, but rather than paying a lesser deposit my parents have lent me some money to buy some.

So to sum up, you are saying to go with The Woolwich on a 2 year tracker (as interest rates are so low) I will massively overpay, then maybe switch to a fixed rate afterwards as interest rates rise so I will have the security of knowing each month the payments. As I said before I hope to pay off the mortgage asap, hopefully 8 years.

Northern Rock 2-year Tracker at 2.59% has a £595 arrangement fee. Many other deals have a £995 fee these days, so this would be good for a smaller mortgage. You can also get an option of around 3.19% with no arrangement fee with Woolwich. The Woolwich deal will likely work out better due to having no arrangement fee at all, and also because it doesn't revert to a higher rate in the future. At Bank of England Base Rate + 2.69%, it will remain at that tracking differential for the term of the mortgage, so that if rates stay low longer-term, you won't need to change it in the future, avoiding further costs.

Given your monthly income, these deals should both be quite easily available provided you don't have massive amounts of outstanding credit elsewhere.

A lender will want to know the source of your deposit, as it would be unusual to be a first-time buyer with such a large lump sum to put down.

So is it best to go for a tracker for a couple of years, overpay massively, then go on a 5 year fix. I aim to pay of the mortgage asap for personal reasons.

Can anyone recommend a good mortgage deal, taking in account the figures in my original post?

With markets in their current state, a 5-year Fixed Rate is unlikely to offer best value for money, incidentally. You would likely be better off with a shorter-term tracker deal (you can get around 2.5% for that) which should lead on to a longer-term fixed rate in a couple of years time. With UK interest rates set to remain sub-1% for at least the next 12 months, possibly 18, typing yourself up long-term into something above 4% isn't particularly cost-effective.

Consulting an independent mortgage adviser would be your best bet. He/she should take account of all of your personal circumstances and recommend a product which fits your affordability and attitude to risk profiles.

Any idea of what % I should be expecting on a 5 yr fix?

Btw thanks for the reply