Mortgage True cost

stevenclarkuk

I've just got a quick question.

When you use https://www.moneysupermarket.com to compare mortages, you are presented with a field called "True cost". I'm guessing that this true cost is calculated taking into consideration any cashback and any payment made upfront and/or added to your mortgage? Is this correct?

Cheers

Steven

MortgageMamma

A true cost is the monthly payments, added fee's, fee's paid upfront, deeds redemption and early repayment charges (if applicable) minus any cashback/incentive etc over a specified period of time. I can't comment on whether money supermarkets online software is as sophisticated as the systems us brokers use, so it's always best to check these figures yourself. You can get the individual figures off a key facts document (quote) and work them out yourself.

stevenclarkuk

Thank you soo much for the quick response...

That's what I thought but you never know sometimes.

Just trying to get some ideas before going to my friendly IFA.

Steven

MortgageMamma

If you are seeing your IFA/mortgage Advisor face to face there's no reason why you cant sit down with them and look at the true cost comparisons on similar deals, (let him/her do the work!)although I must say that not all recommendations an advisor makes are based on cost alone, there are other factors to consider.

best of luck

Aiadi

I was using moneysupermarket and also wondered about this 'true cost' column. The website doesn't really make it clear so thanks for explaining that! :T

James_H

I don't think the Moneysupermarket 'True Cost' is the true cost. I thought it only seemed to be total monthly repayments less any cashback at the outset. This distorts the table by pushing all the cashback mortgages to the top.

Because of this, it's not really a fair comparison and if you are doing a DIY mortgage search, you need to do your own separate calcs with the extra items. I'm glad to hear offline brokers have much better searches - it would put me off if they were limited to only do what Moneysupermarket can do.

As MortgageMamma says, the product fees, valuation costs, legal costs now and redemption fee at the time you next remortgage need to be allowed for but most online calculators don't include all these.

Don't forget that if doing a comparison over, say 2 years, ignore the 'true cost' for products with overhang beyond this (as they will look good due to a low initial interest rate) and change the true cost period to at least that of the ERC period for those products.

Although not of huge impact in the early years, the lower the interest rate, the lower the calculated repayment, but the capital is cleared slightly quicker with the lower interest rate. I have never seen an online calculator that shows the effect of that in an overall true cost comparison (Moneysupermarket certainly doesn't).

By all means, use Moneysupermarket as a guide but don't assume its top of the table products are necessarily the best.