IFA recommendation

[George]

Hey guys can anyone recommend a good Independant Financial Adviser?

My wife and I are looking to buy a property and need some advise with the mortgage.

Thanks George

[Dombo]

We used John Charcol and found them quite good. They specialise in mortgages only as far as i know.
Whether you go fixed or variable is up to you - fixed is useful in terms of knowing what your outgoings will be, while variable rates can be lower initially as you bear all the interest rate risk should rates start moving up - the adviser shouldn't try to influence you in terms of his view on where interest rates are headed. Apart from that, the shortest loan period gives big savings on a repayment mortgages, so a 20 year vs a 25 year term will give you massive savings in total amount payable. One general piece of advice I'd give is always match the loan term to the asset you're buying, ie long term loans to long-lived assets, eg don't be tempted to add a bit onto a 25 year mortgage to cover furnishings, holidays cars etc.

[Grahame]

Generally good advice from Dombo.

I'd add to that a tip I was given when I bought my first house: Ask about how overpayments on a repayment mortgage will be treated? I based my choice of mortgage largely on the answer to this question. Then, by paying 10% extra each month, I was able to pay the whole thing off in just under 13 years rather than the scheduled 25. Saved me about £30,000, for about £30 per month (just under £5000 total).

[Elliot M]

Grahame, that seems as if it should continue "Given the table of historic interest rates below, what was the purchase price?"

[Grahame]

Sorry, my earlier calculations were wrong - I've looked back through my files and the payment schedule was £500/month and I overpaid about £50 each month.

Mortgage was taken out soon after I graduated, so in the early 90s, and if I remember correctly was a £60k loan (25 year, repayment mortgage rather than an endowment policy) on a £65k house. Scheduled repayments were around £500/month. I can't remember the interest rate as it didn't seem too important. What I based the calculations above on was saving the around £300/month for over 12 years (incorrect figures, as it turned out). It works by starting to pay down the capital of the loan much faster in the early days than the "basic" payments allow. The faster you pay down the capital, the lower the interest in later years and it accelerates the effect remarkably quickly.

(If the scheduled payments were EXACTLY £500/month, and I paid it off EXACTLY 12 years early, the savings would have been £72000, but I can't remember the exact dates or monthly repayments concerned. Some mortgages dissuade you from early repayment by charging extra for any early or overpayment to make it less advantageous).

[Elliot M]

I hate to be picky but I happened to be in the right in the middle of modelling the effect of my own mortage overpayment in Excel, and those term reductions and savings would seem to be a consequence of interest rates falling significantly but staying well above what they are now.

£60k at £500/month over 25 years would be 8.9% APR over the term
£60k at £550/month over 13 years would be 4.2% APR over the term

At a typical current APR of 2.5%, all else equal, your initial term would have been 11.5 years, but only reduced to 10.5 years by the overpayment.

A similar degree of initial term reduction would now need about 60% overpayment.

I think. E&OE, and of course interest rates may change significantly...

Sorry!

[Grahame]

That does sound about right. I think the interest rate in the early 90s was about 8.5%.

[Dombo]

Interesting times indeed:
http://news.bbc.co.uk/onthisday/hi/date ... 519013.stm

http://www.marketoracle.co.uk/Article13682.html

Am a total numpty so couldn't paste the chart image.

Bottom line, decide what you can afford each month, with some wriggle room if rates go up, overpay if you can, providing no penalties (often the lender will impose a limit on overpayments), and only borrow against the house to buy or improve the house.

[Elliot M]

agreed (this does not constitute advice).

if anyone is interested ( ), the Excel formula to give repayment term in years is:

=NPER(annual interest rate/12, monthly payment, -mortgage amount)/12
e.g for 2.5% APR, £500/month, £100,000 mortgage:
=NPER(0.025/12, 500, -100000)/12
=around 21.5 years

to give monthly payments, eg if interest rate goes up:
=PMT(annual interest rate/12, repayment term in years/12, -mortage amount)
e.g. for 5% APR, term as calculated above, same mortgage:
=PMT(0.05/12,21.58*12,-100000)
=around £632

[Jon H]

Just sell a kidney.

[Bridget]

Isn't Marcus an IFA? I'm probably wrong - I get everyone's jobs wrong

[sonic909]

[quote="Bridget"]Isn't Marcus an IFA? I'm probably wrong - I get everyone's jobs wrong

[quote="sonic909"][quote="Bridget"]Isn't Marcus an IFA? I'm probably wrong - I get everyone's jobs wrong