How to calculate savings/costs?

SPGee

Help needed to get my head around the calculations:
SRV for mortgage is 3.5%; an offered Fixed rate is 4.44% (3 years)and the lender is charging £999 to move to this Fixed Rate.
An higher offered Fixed rate is 5.04% (3 years) but only £299 product fee

How do I calculate the actual difference/cost of the above options? i.e. there must be a formula I can used based on the mortgage value etc?

Thanks
Steve

dimbo61

Try " whatsthecost" and put in the figures for both deals with the fees added

Robert_Sterling_3

A little bit of mental arithmetic.

Lower rate loan has a higher fee ......... Extra £700

The interest rate is 0.6% lower

.6% lower saves 60p per £100 of capital balance per year.

or £6 off £1,000 capital balance per year

or £18 over the 3 years

So i see that the "fulcrum" amount of mortgage is not far away from £40,000

The higher your balance the more you benefit from the £999 fee

On £40,000 you save 40 times £18 Saves £720

On less than £40,000 pay the lower fee.

I have not done this sum to 20 decimal places of accuracy but only as a guide.

Answer: If the outstanding balance is low go for the low fee.

If the outstanding balance is high go for the high fee.