Which remortgage rate makes sense?

HouseBuyer1 · 20 July 2017 at 4:59PM

Hi

I'm about to pick a remortgage product and am looking for a bit of reassurance to check my calculations are correct on a 5 year fix.

Option 1:
Interest Rate: 2.34%
Product Fee: £0
Monthly Payment: £527pm

Option 2:
Interest Rate: 1.99%
Product Fee: £849
Monthly Payment: £504pm

Option 3:
Interest Rate: 1.94%
Product Fee: £1249
Monthly Payment: £527pm

From the calculations I have done ((60months x the monthly payment)+product fee) then Option 2 seems to be the lowest cost overall at £31089 overall. Something seems strange about this as it is the middle rate and fee

Am I calculating this correctly?

Also, if I choose to add the product fee onto the mortgage, is there a way I can calculate if this will then cost me more overall as this will effectively be longer on the mortgage and additional interest?

Thanks for any help

getmore4less · 20 July 2017 at 5:13PM

Wrong calculation.

You need to consider how much debt is left after 5 years.

Lower rates pay off more debt.

Neutrinno · 20 July 2017 at 5:27PM

getmore4less wrote: »

Wrong calculation.

You need to consider how much debt is left after 5 years.

Lower rates pay off more debt.

(and also factor in the cost of the product?)

HouseBuyer1 · 20 July 2017 at 5:28PM

Thanks, I knew it didn't feel right. Have double checked and the overall estimated cost of borrowing at the end of the term is lowest with the lowest rate product. Having said that, the middle rate is only £10 more expensive overall.

Overall cost of borrowing:

Option 1 - £202,625
Option 2 - £200,763
Option 3 - £200, 775

And again, that isnt including the cost of the product added to the mortgage

getmore4less · 20 July 2017 at 5:42PM

Add the fees make the payments the same and see what's left.

That will be the closest like for like you can do before you start to factor savings rates for the difference in payments.

getmore4less · 21 July 2017 at 9:59AM

on a proper computer so can do the calcs

With a payment of £527 depending on term thats a mortgage of around £100k(20y) to £165k(40y) £265k(I/O)

not sure what amount borrowed is or how you got your numbers in the £200k range

for an intitial estimate the simple calculation is the interest only savings & break even mortgage size over 5years
fee
2.34% V £849 1.99% V £1249 1.94%

give 3 comparisons.

(£849/5) / 0.0035 = £48,515
(£1249/5) / 0.0040 = £62,450
(£400/5) / 0.0005 = 160,000

anything over around £49k option 2 is best that leave iit between 2&3

the break even for option 2 and 3 will be around £160k depending on term

if under £160k then option 2 is the best

to see how close that gets on repayment terms with a £527 payment over 5y

£160,000 2.34% £146,329
£160,849 1.99% £144,445
£161,249 1.94% £144,484

that makes sense because on repayment the breakeven goes up from the interest only

HouseBuyer1 · 21 July 2017 at 10:39AM

Thanks so much getmore. Appreciate you taking the time to help calculate that out.

It's a mortgage of 130k (remaining at the time of remortage) over a term of 28 years. The numbers I referenced in the £200k range was the overall cost of borrowing outlined in the Key Facts for each of the products. Thinking about it though, this would be based on the full 28 year term including switching to the SVR after the 5 year fix would end.

Based on your calcs, I think option 2 should be the winner then.

Thanks again

amnblog · 21 July 2017 at 12:22PM

80% LTV Barclays 5 year fixed rates.

On £130,000 fee the 1.99% rate works out favourite mathematically (about £200 in it) - from the 1.94% rate with the fee free rate bringing up the rear.

Option B is to take the 1.73% (£490 pcm) no fee, tracker now and fix if you need to when rates look like moving.

Not advice. Just an idea.

Get some advice if you decide to do this.

HouseBuyer1 · 21 July 2017 at 3:37PM

Thanks amn

I hadn't considered a Tracker - had originally been thinking about Fixed only but will have a look into tracker as well.

Thanks

amnblog · 21 July 2017 at 3:48PM

Make sure you get some advice.

getmore4less · 22 July 2017 at 8:00AM

if these are Barclays EMC rate that tracker has 1%ERC attached.

lost a number crunch of the 2y+2y option and that showed you need rises of 1%+ to be worse off over 4 y against the 5y fix even with the extra fees

doing the 5y numbers for your £130k. paying £527

£130,000 2.34% £112,610
£130,849 1.99% £111,309
£131,249 1.94% £111,431

Which remortgage rate makes sense?

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free