Our story resumes where we left off, which is to say immediately after my brother and I decided to put in an offer on a house.
We began the day with separate but related objectives: my brother would contact the estate agent with our offer, while I would set about convincing some poor, unsuspecting mortgage lender that the two of us are, taken together, broadly equivalent to at least one responsible adult.
Anyone who knows my brother and I will tell you that this is no small feat, but thankfully I had some help. I refer, of course, to my colleagues on the residential mortgage desk, whose assistance I enlisted in picking a victim lender.
Choosing a mortgage rate
Up until now, my brother and I had been mostly looking at term tracker mortgages. It’s true that fixed rates are exceptionally low right now, but the lure of potentially never having to remortgage (and pay another round of arrangement fees) had been hard to resist.
So, when Beckie suggested a two-year fixed rate from Santander, we had to stop and think about it. The rate was broadly the same as what we’d seen for a term tracker, but was it really what we were looking for?
The answer, it turns out, was yes. We had only done some very crude pricing calculations, weighing the raw cost of fees against any savings in interest payments, and we had forgotten two important factors:
1) Cashback (and other incentives). In practice, this serves to offset the cost of fees, but we hadn’t even looked at it. This can considerably reduce the overall cost to the consumer when considering the effect over several remortgages.
2) The big one – we hadn’t considered the increase in our equity over time. Put quite simply, we’d been weighing the costs as if our LTV was fixed, but with a repayment mortgage our balance would reduce every month. In two years’ time, we’d be able to switch to an 85% LTV product, which based on today’s rates would cut our interest payments by roughly a third.
Getting the Agreement in Principle (AIP)
While we were mulling it all over, however, the estate agents were busy trying to convince us to defect to their broker. You might think that they’d have left us to it after we told them who my employers are but no, apparently some people won’t take a hint.
A couple of days later we’d decided that yes, a two-year fixed rate really is a good idea, so I made the short trip back to the residential mortgage desk and kindly requested a decision in principle (also known as agreement in principle). With all our details already on file, all we had to do was wait. I returned to my desk, got on with my day, and went home to find the AIP already waiting in my inbox. Great!
But why had we still not heard back from the vendor...?
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