Is cheapest mortgage best?

Jacka87

I am looking to remortgage, as I am only in my early 20s and dont expect to move in the next 5yrs I thought 5yr fix would not be bad. I was dong some comparisons earlier and used the fsa tables as a base point.

I sorted the deals in terms of initial rate (as its a fixed rate I am looking for) and then I compared the monthly cost of the first half dozen inclusive of fees. To do this I divided up the total fees for each mortgage into a monthly amount. So say fees of £600, that would be £120pa so £10 a month on top of the mortgage.

After doing this I found some interesting results.

Co-op= 4.99%, £604.21 total Monthly cost with fees
Leeds BS = 5.10%, £604.83 total Monthly cost with fees
Chelsea= 5.10%, £606.62 total Monthly cost with fees
HSBC= 5.39%, £607.00 total Monthly cost (no fees at all on this deal)

As a result I am thinking that the difference in cost of these mortgages is less than £3pcm, nothing really!

So what would be the best way to split them, base it as cheapest is best ie Co-Op. I know the ERC's are slightly different for each and then theres the fact that some have large upfront fees and others dont, along with lender reputation. How to you decide when the actual cost for each is so low???

all different opinions appreciated, just looking to get a view of what people in general would do???

happybroker

it depends on how much money you are borrowing and what the fees are. From your example above it would be difficult to justify paying a fee and you would also need to remember that interest will be charged on any fees added over the term of the mortgage, not the product (ie 20 years as oppposed to 3 or whatever)

Jacka87

Ok so thats one for the no fees category, I suppose tho that you could pay the fees upfront and thus not incur any interest on them. Tho if the fees where added to the mortgage that would probably negate much the £3 monthly difference

However the point is noted that why pay large fees when we are talking about £3 pcm of a difference.

Still the question is to be answered as to what else is considered other than the bottom line cost when the difference in cost are so similar. Aiming at a discussion rather than an ask for opinions thread folks.

happybroker

criteria is a consideration, some won't fit all lender's criteria (ie length of time self employed, residential status, tax status etc etc) and so may have little or no choice on what fees are paid.

Jacka87

Sorry I think I have maybe not given the right impression on what I was asking.

Assuming there are different mortgage providers offering fixed rate deals that effectivly will cost the same amount (ie similar rates or lower rates balanced against the fees). How would you decide for or against which mortgage was for you? (ie) is the best deal the cheapest deal or would different mortgage benifits be more of an attraction for the borrower?

which of these would swing you towards a specific lender? bank reputation, ERC charges or overpayment allowances? Or do you simply just go for who offers the cheapest deal?

happybroker

if it's not to be a thread containing opinions then I don't really understand as what would sway one person might not be of interest to another....it would be a matter of opinion and an individuals outlook. For instance they are of the opinion that it would be great to be able to overpay as much as they wanted or of the opinion that they would want to go with a bank with a fabulous reputation (though that could take some finding just now!!).

Jacka87

Ok lets start again. was looking to start a little discussion on peoples opinions of how they would choose which lender to go for if the bottom line costs where the same or in the example I gave very similar.

ie I am looking for peoples opinions but not advice on my situation, more what they would consider to be of interest to them.

I think I should have maybe started a poll instead but as there has been little interest in the thread other than happy broker then it seems I am the only one that was curious.

Thanks for your comments anyway happy broker

_Andy_

Another factor worth considering is what the SVR will be like once the fixed rate ends.

dimbo61

Have you put the figures through "whatsthecost" and see how much you would owe at the end of the 5 years on each of the 4 deals adding any costs( fees!) onto the amount borrowed to find which gives you the lowest amount still owing after the 5 years.

Jacka87

Surely the svr is irrelevent cos we dont know what it will be in 5yrs time and also at the end of the fix I wouldbe likely to be looking for another mortgage, either another fix or a tracker etc?

I have not put it through whats the cost. Will do that to get a comparison to my own calcs but I was more interested in hearing what benifits would swing peoples opinions when the costs where so similar.

Thanks

dimbo61

If you get a five year fix you will know your mortgage payments for the next 5 years no matter what the SVR is.
What is important is how much you will owe at the end of the 5 years and how much the mortgage payments and fees add up to over the 5 year period.
If you get the LTV below 75/60% you may well get a better deal next time!