Checking the best mortgage available for me, a few questions.

tomstickland

After talking to two mortgage consultants (one tied to an EA, the other all of market), they both came up with fixed rate deals for 2 years, one at 4.3% and the other at 4.4%. This is for a £76.5K borrow on a £86.5K property.

I've been searching the net for other deals, and the rates the consultants have found are pretty much in line with the best out there.

I've just had a look on Charcoal and once again the rates are similar. I've just compared the 4 best mortgages and there are a few details I don't have enough knowledge to understand.

Mortgage no1 has early repayment charges of:

Early repayment charges - 3% of the sum repaid until 30/04/08, 2% of the sum repaid until 30/04/09, interest to the end of the month thereafter

whereas no3 has

Early repayment charges - 3% of the sum repaid until 30/04/08, interest to the end of the month thereafter.

and no4 has

Early repayment charges - 2% of the sum repaid until 31/05/08.

I'm going to let it run the full 24 or 25 months. What is "interest to end of month". Is that one months interest? ie: around £300?

No4 looks the best since it doesn't seem to have any charge if I wait until the end of the 25 month period.

No1 has the lowest monthly payment for the first two years. its £15 per month cheaper than no 4 for 24 months, but then it's £40 per month more expensive for a year if I want to avoid the 2% of sum repaid penalty. Hence it doesn't save anything really.

Some of these are showing as fixed, others as variable and others as discount. I really want a fixed rate. Am I correct in assuming that a "2.26%" discount means it's 2.26% below their standard rate. Can this change over the introdutory period? Same with "discount base rate tracker". I don't care what it does after the first 25 months.

MortgageGenie

Hi,

Out of the differnet types of mortgages you've mentioned only the fixed rate will give you bugeting certainty for the first 2 years. The others, BOE tracker (moves in line with the Bank of England base rate) or discount (usually moves in line with the relevant banks own standard variable rate - although not always in an equitable manor), can change at any time. Both these types can act in your your favour if interest rates go down but it can also work the other way. If you're on a tightish budget then prudence would usually hedge towards a fixed rate. Have a read through Martin's article here.

With products where, on redemption, the interest is charged until the end of the month you have to make sure you don't leave the lender until the last day of the month or you will pay interest for money you no longer owe. This isn't a reason to avoid a product if the rate is favourable.

Hope that heps.

tomstickland

Thanks for the info. I've read Martin's mortgage article and the help files on Charcoal now, so I understand the various mortgages better.

Based on Martin's article, I class myself in a position where a variable rate would be good. ie: I can afford to pay almost double the monthly amount, so I should ride any drops in interest rates. Then again, fixed is fixed, so there won't be any surprises. Personally I don't see interest rates dropping much in the next few years - the BOE are trying to reign in borrowing levels etc.

AndrewSmith

Tom,

May not be right for you but have a quick look at this one before you decide for sure

http://www.britannia.co.uk/mortgage/fixed/2_year/index.html

Andy

tomstickland

I looked at that the other night after Britannia coming out top in my Charcoal search.
There's very little to differentiate between the top 3-4 mortgages I've found.

When they quote the overall APR, I assume that that's for the fixed term? If so, I found one the other day with a 4.3% rate but 5.6% APR, compared to the 6.0% APR showing for that Britannia offer.

I'm wondering if I should go variable rate, so I can enjoy some entertainment every time the BOE rate is up for review.

AndrewSmith

APR assumes the entire mortgage term, and staying on today's SVR after the initial incentive period.

Andy

tomstickland

OK, so pretty much useless info if I'm going to switch after the 2 year term then.
I'll just go and run my mortgage spreadsheet and see what 4.29 does compared with 4.3 & 4.3%.