Which of these is the best deal?

Taksin

The mortgage has 21 years left, £64,000 approx. Which is the best deal on a two year discount tracker from these?

• base rate plus 1.14% so 6.14%, this has a £499 fee.
• base rate plus 1.44 so 6.44%, no fee.
• base rate plus 0.8% which is 5.98% at the moment, this has a £599 fee.

Which ever rate I chose the fee would need to be borrowed as part of the mortgage so we'd be paying interest on that over the term of the mortgage.

Thanks for any help!

minimike2

I would go with the last one - 0.8 over base £599 fee.

Looking at the calculations there is little difference between that and the one with no fee, with the cost of the fee factored in, but as the margin is lower you wouldnt feel it so much if base increases.

Is it definately a tracker that you want?

lisyloo

Are these with your existing lender?

If not you need to include valuation fees, legal fees, exit fees etc.

Do you really want a tracker?
Do you really want a 2 year deal?

I've just gone for a 10 year fix (so quite opposite) as my view is that rates will rise and in 2 years time we'll be in a mess. Also I won't have to pay any fees, whereas during that period you will be paying FIVE lots of fees if you continue on 2 year deals.

Maybe you want to dicuss the wider issues surrounding your choice?
or maybe you know exactly what you want?

Taksin

The top two are with our exisiting lender, the bottom is with a new lender. AFAIK, there are no other fees other than those mentioned but I will check that later when I speak to the advisor.

I saw a mortgage advisor who quoted the bottom deal, I then called my exisitng company who mentioned the top two deals. I am waiting them to get back to me with the exit fee.

I've had a fixed rate before, rates dropped and we ended up better off paying the redemption fee to get out when we moved rather than port the mortgage. We've had a tracker for the past two years, it has gone up several times and down several times. As the mortgage is very small then it doesn't make a huge difference to the monthly payment.

minimike2

Right - With the bottom one meaning you will have an exit fee to pay, the middle one would become the best option. It really is that tight in the difference in cost.

Taksin

minimike2 wrote: »

Right - With the bottom one meaning you will have an exit fee to pay, the middle one would become the best option. It really is that tight in the difference in cost.

Doesn't the top one work out at a cheaper monthly payment and less interest paid over the term?

I found an online calculator and that is what I though. Won't it depend on how little or how much the redemption fee is?

minimike2

Its the total overall cost which is the important thing. Paying a fee is just like paying up front interest, and if thats added onto the loan you then pay interest on top of that up front interest.

The difference in cost on the second two really is next to nothing (i think it was about £50 or something, its been a few hours since i did the maths!!), and most lenders redepmtion charges are at least £90, so wouldnt be worth swapping...