Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • chelseablue
    • By chelseablue 3rd Oct 17, 10:43 AM
    • 2,296Posts
    • 2,822Thanks
    chelseablue
    Is lower rate better on large loan?
    • #1
    • 3rd Oct 17, 10:43 AM
    Is lower rate better on large loan? 3rd Oct 17 at 10:43 AM
    Fix isn't up until March but starting to look around at rates.

    Currently with Halifax, on 1.49%. Current balance is £220,000 and the monthly payment is £720

    Halifax are offering 1.59% to switch to a new deal with them, monthly payment would increase to £760

    Looking at the Best Buy tables, we could move it to Santander where the rate would be 1.09% and monthly payment of £710
    Although the product fee is £1,499

    Obviously the benefit of staying with Halifax is not much hassle and no fees

    Is the general consensus to go with the lowest rate possible on our size loan, even with a high fee?
    Mortgage starting balance 26.02.16 £231,294
    Mortgage after Year 1 £225,078
Page 1
    • wacky75
    • By wacky75 3rd Oct 17, 12:32 PM
    • 15 Posts
    • 14 Thanks
    wacky75
    • #2
    • 3rd Oct 17, 12:32 PM
    • #2
    • 3rd Oct 17, 12:32 PM
    you need to add the fee to the term of the mortgage, then divide by the term.

    e.g. if this a 2 year term, 1499 / 24 = 62.46 (+710) = 772.46 per month
    • chelseablue
    • By chelseablue 3rd Oct 17, 12:58 PM
    • 2,296 Posts
    • 2,822 Thanks
    chelseablue
    • #3
    • 3rd Oct 17, 12:58 PM
    • #3
    • 3rd Oct 17, 12:58 PM
    you need to add the fee to the term of the mortgage, then divide by the term.

    e.g. if this a 2 year term, 1499 / 24 = 62.46 (+710) = 772.46 per month
    Originally posted by wacky75
    Thank you! Never thought of doing that calculation


    Yes it is a 2 year rate, so in the example I used we would actually be better of staying with Halifax.


    So what I really need to find is a lower rate with no fee? Or a fee that makes the monthly figure over the 2 years less than £760 a month.


    Because if we re-fix every 2 years the fees soon add up!
    Mortgage starting balance 26.02.16 £231,294
    Mortgage after Year 1 £225,078
    • AnotherJoe
    • By AnotherJoe 3rd Oct 17, 1:41 PM
    • 7,670 Posts
    • 8,279 Thanks
    AnotherJoe
    • #4
    • 3rd Oct 17, 1:41 PM
    • #4
    • 3rd Oct 17, 1:41 PM
    I dont think you can just do that calculation. Dont you also need to know how much is owing at the end of the 2 year term?
    • Lokolo
    • By Lokolo 3rd Oct 17, 1:57 PM
    • 19,849 Posts
    • 14,926 Thanks
    Lokolo
    • #5
    • 3rd Oct 17, 1:57 PM
    • #5
    • 3rd Oct 17, 1:57 PM
    A very basic example as I am not counting the reduction of the capital. But if you are using the same term, this won't make a difference.

    Halifax interest over 2 years is £6,996
    Santander interest over 2 years is £4,796. Add the product fee. Total is £6,295.

    Therefore over 2 years you would save ~£700 by moving to Santander assuming no other costs.
    • Tammykitty
    • By Tammykitty 3rd Oct 17, 2:01 PM
    • 545 Posts
    • 1,167 Thanks
    Tammykitty
    • #6
    • 3rd Oct 17, 2:01 PM
    • #6
    • 3rd Oct 17, 2:01 PM
    https://www.moneysavingexpert.com/mortgages/compare-mortgage-rates


    A calculator which shows how much you will pay, and the mortgage left at the end of the period
    Weight Loss Challenge
    Start: 10th September 2016 - 49lbs to lose.
    Progress - 22/49 (3/12/16)

    Restarted 8/05/17 - 41lbs to lose (Managed to put 1 stone on in 4 months!) Progress 6/41 (13/05/17)
    • getmore4less
    • By getmore4less 3rd Oct 17, 2:08 PM
    • 30,740 Posts
    • 18,376 Thanks
    getmore4less
    • #7
    • 3rd Oct 17, 2:08 PM
    • #7
    • 3rd Oct 17, 2:08 PM
    Fix isn't up until March but starting to look around at rates.

    Currently with Halifax, on 1.49%. Current balance is £220,000 and the monthly payment is £720

    Halifax are offering 1.59% to switch to a new deal with them, monthly payment would increase to £760

    Looking at the Best Buy tables, we could move it to Santander where the rate would be 1.09% and monthly payment of £710
    Although the product fee is £1,499

    Obviously the benefit of staying with Halifax is not much hassle and no fees

    Is the general consensus to go with the lowest rate possible on our size loan, even with a high fee?
    Originally posted by chelseablue
    add the fees make the payment the same see what's left at the end of the promotional period

    a rough calculation is to use interest only and see the saving in interest

    0.0159-0.0109*220,000= £1100py so after 2y about £700 saved

    it will be a bit less as you ere on repayment and that does not take account of the fees but not by a lot.

    eg after 2 years
    £220,000 @ 1.59% £760pm £208,583
    £221,499 @ 1.09% £760pm £207,947

    £616 saving.
    • getmore4less
    • By getmore4less 3rd Oct 17, 2:10 PM
    • 30,740 Posts
    • 18,376 Thanks
    getmore4less
    • #8
    • 3rd Oct 17, 2:10 PM
    • #8
    • 3rd Oct 17, 2:10 PM
    you need to add the fee to the term of the mortgage, then divide by the term.

    e.g. if this a 2 year term, 1499 / 24 = 62.46 (+710) = 772.46 per month
    Originally posted by wacky75
    that does not work as it implies the fee based is more expensive when it's not..

    lower rate pays off more capital
    • amnblog
    • By amnblog 3rd Oct 17, 9:03 PM
    • 10,069 Posts
    • 3,925 Thanks
    amnblog
    • #9
    • 3rd Oct 17, 9:03 PM
    • #9
    • 3rd Oct 17, 9:03 PM
    Have you also considered the 1.24% Halifax rate with the £999 product fee?
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • getmore4less
    • By getmore4less 4th Oct 17, 4:52 AM
    • 30,740 Posts
    • 18,376 Thanks
    getmore4less
    eg. after 2 years
    £220,000 @ 1.59% £760pm £208,583
    £221,499 @ 1.09% £760pm £207,947

    £220,999 @ 1.24% £760pm £208,087

    £130 more but easy switch and no risk of other costs(like the exit fee).
    • chelseablue
    • By chelseablue 4th Oct 17, 9:04 AM
    • 2,296 Posts
    • 2,822 Thanks
    chelseablue
    Have you also considered the 1.24% Halifax rate with the £999 product fee?
    Originally posted by amnblog
    Is that just for new customers?
    Mortgage starting balance 26.02.16 £231,294
    Mortgage after Year 1 £225,078
    • chelseablue
    • By chelseablue 4th Oct 17, 9:07 AM
    • 2,296 Posts
    • 2,822 Thanks
    chelseablue
    Now I'm even more confused

    So, I need to work out how much we would owe at the end of the 2 years and the one that takes the most off the balance is the one to go for?
    Mortgage starting balance 26.02.16 £231,294
    Mortgage after Year 1 £225,078
    • getmore4less
    • By getmore4less 4th Oct 17, 11:12 AM
    • 30,740 Posts
    • 18,376 Thanks
    getmore4less
    Now I'm even more confused

    So, I need to work out how much we would owe at the end of the 2 years and the one that takes the most off the balance is the one to go for?
    Originally posted by chelseablue
    A lower rate pays of the capital quicker than a higher rate so you have to account for that.

    You need to compare the starting point, the end point and the cashflow

    For a given amount of your real money which one reduces the debt the most.

    easiest way to do this is make the starting point the same with zero cash difference by adding the fees, or if you pay them a smaller debt on the no/lower fee deal.
    (some say paying the fees up front is better, for this comparison the difference is very small and reduces the savings as you are just borrowing less*)

    Then you have the monthly payment, make them the same and you don't have to account for the difference in payments, if planning to overpay use that amount.

    Then see how much is left at the end, lower is better
    .........

    That the straight financial difference on the deals you then have the other factors

    You want a lower monthly payment.
    The rates are so low you should be saving any surplus.
    If different lenders there may be other fees and different follow on rates to consider
    .........

    * pay the fees or not
    add the fees
    £220,000 @ 1.59% £760pm £208,583
    £221,499 @ 1.09% £760pm £207,947
    £636
    pay the fees
    £218,501 @ 1.59% £760pm £207,036
    £220,000 @ 1.09% £760pm £206,415
    £621
    • chelseablue
    • By chelseablue 4th Oct 17, 11:24 AM
    • 2,296 Posts
    • 2,822 Thanks
    chelseablue
    Thank you very much, we're planning to overpay by at least £500 a month from the summer.


    Was just looking at First Direct who are offering a 5 year fix at 1.74% booking fee is £725
    As they allow unlimited overpayments, we can then pay off as much as possible in 5 years and look at moving house.


    Never though of a 5 year fix before as I thought rates would not be worth considering, was pleasantly surprised. Also saves the hassle of switching every 2 years
    Mortgage starting balance 26.02.16 £231,294
    Mortgage after Year 1 £225,078
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

5,726Posts Today

7,218Users online

Martin's Twitter
  • I realised I forgot in my links earlier. 1. Help to Buy ISAs, how they work and best buys...? https://t.co/BSCNPeqiVF

  • RT @whatdawndid: Thanks to uncle @MartinSLewis I just received £200 back, just like that from the student loan company! Turns out that the?

  • RT @LaraLewington: Shocked and saddened by Cheggers news. Working with him on It?s A Knockout was my 1st job in telly when I was just 19. H?

  • Follow Martin