How do I work out the best deal?

BellaBargains

We are thinking about extending our house - have had plans drawn up and so on. We are currently on a 4.99% fixed rate with NR until December 09. If we change our mortgage before that we will incur charges of around £1500. I'm looking for a reasonably long fixed rate - 5 yrs, maybe more, but with the flexibility to overpay without penalty. I see some good rates out there but I can't work out whether I'm better with the lowest rate and a higher set up cost or a slightly higher rate and a lower set up cost. At an estimate our new mortgage would be in the region of £100-110K on a house valued at around £200 (before the extension). Anyone able to give me an idea of how to work out what would be best?
TIA
BB

BellaBargains

Can anyone help?

getmore4less

you need to set the dates you want to work over and work out the total costs taking into account fees and rates.

One method is to use the same start and end point and work out the monthly cost.

Another is to set the monthly cost and see which loan pays of the most in your time period.

I use this calculator for my calculations.
http://www.whatsthecost.com/mortgage.aspx

There is a spreadsheet to help somewhere on this or the Mortgage free board.

You should also consider you assumption that a timed based deal is best, long term trackers can be good also since they do not involve recuring fees which are a big factor these days many would have been a lot better of if they had not fixed.

dimbo61

Alot of 5 year fixed rate deals are still about 4.99% or very slightly lower and I dont think rates will drop a whole lot more ( think LIBOR not BOE !! )
So the deal you have with NR is not bad and why pay out £1500 to change to another deal which will cost you alot more £995 arrangement fee, survey fee, solictors ETC.
You have 50% LTV so you can tranfer elsewhere but please tell me about the better deals which will save you all the costs of moving lender !!
If you really need this extension and can afford it then go and see your existing lender but beaware that any deal you take out runs out in DEC2009 or wait and save/ overpay till Dec2009

BellaBargains

The reasons for jumping ship early would be that there is always the chance that interest rates will have gone up by the end of '09, if we extend in the Spring/Summer we benefit from the 15% VAT rate and also - I'm impatient and want it now (which isn't a good reason, I know).

I'll have a look at that calculator and see if I can get my head round it!

I can't remember what mortgage had lower set up fees - I didn't say they were free, but they were considerably lower and the rate a bit higher.

Thanks
BB