Is cheapest mortgage best?

samnorris2

dimbo61 wrote: »

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!

I agree with Dimbo. One thing often over looked is the amount of equity you will have in you home at the end of the fixed rate period. Paying the least off over the period may no be the best if you come out with less equity.

I'd take the cost over the term (monthly payments x term length) + (arrangement fees) + remaining balance. This will give you the total effective cost.

Another couple of things I consider are overpayments permitted at no cost - the key to paying off you mortgage early. Most mortgages you can overpay 10% of the capital per year. Nationwide allow £500 but some don't.

For those with a google account here is a good spreadsheet to track all these numbers. It's in dollars but just overlook that.
http://spreadsheets.google.com/ccc?key=tDotr54o91CcXb4LgnAaFUw&hl=en

Jacka87

That does make sense that you would like to know the remaining balance but I cant see how the svr is of any relevence as after the fixed period you would generally be looking for another mortgage deal that suits at the time, say another fix but with lower svr.

In terms of overpayments being the thing that would swing it, thats the exact sort of stuff that I was loking for fom the thread. Overpayments would be a good thing for you and that would be a something that maymake you personally choose that mortgage. In my case, I am looking to put any extra cash into paying off a loan from my parents and then looking at investing into my small business so the mortgage overpayments would be good but think they will not happen until after the fixed period ends anyway.

cake21

Another one here for overpayments, I choose to have a lowish minimum payment I can comfortably pay and then top up with overpayments. I wouldn't even consider a mortgage limited to overpayments of £500/month for example. This way I have flexibility in case of money worries further down the track.

In addition what are the ERCs for each product? Some have, say, a 3% ERC for the whole of the fixed rate period, others might have 5% in the first year, 4% in the second...until 1% in the fifth year. Again for the flexibility I would prefer the latter.

Start a poll...I'd vote

Gorgeous_George

£100K over 25 years and assuming that the fees are added to the loan amount, I estimate that your fees are £3.5K and £2.5K for the first 2 deals and £0 for the 4th deal.

After 5 years you will owe approximately £91,630, £90,885 or £89,043 for the 1st, 2nd and 4th deals respectively making the 4th deal a firm favourite.

Post the actual loan amount, term and product fees for more accurate number crunching (or pm me with an email address for a copy of my spreadsheet).

GG

michaels

That assumes the fees are added to the loan and I think the OP has adjusted the actual payments to reflect the cost of the fees?

One thing to look at are the fess to switch to a new lender after the fixed rate period, these can vary by a couple of hundred - plus the ERP issues already mentioned and I guess possibly portability / flexibility should you have a change in circumstances (meet someone and get pregnant and need to move to a bigger place - might happen) similarly likelihood that the lender would give letting consent should your job move.

Gorgeous_George wrote: »

£100K over 25 years and assuming that the fees are added to the loan amount, I estimate that your fees are £3.5K and £2.5K for the first 2 deals and £0 for the 4th deal.

After 5 years you will owe approximately £91,630, £90,885 or £89,043 for the 1st, 2nd and 4th deals respectively making the 4th deal a firm favourite.

Post the actual loan amount, term and product fees for more accurate number crunching (or pm me with an email address for a copy of my spreadsheet).

GG

Jacka87

To clarify the fees are no where near as large as you have assumed GG. however I was basing my calcs on paying the fees upfront but for monthly cost benifits I decided to split the fee effectivly into monthly bites to work out how much that would have been per month. I suppose the alternative would have been to work out the total paid over the 5 yr period, I just was thinking monthly cost at the time.

Thanks Michaels for pointing out the fees to move after the fixed period. I forgot all about them and was just assuming in my head that after 5yrs I would be free to move, obviouslly need to consider that!

Cake21 I like the idea of paying the minimun required and then topping it up with overpayments, I suppose that makes it less stressful if you end up losing your jb or whatever that you know you are more likely to still be able to pay the monthly amount and that you may even have earned a payment hol or that along the way.