Fees included or paid up front, what's the difference

barryireland

VIGILANT22 wrote: »

No I am saying you only have 50k...one figure 50k...as a starting point...then you can compare...how the h*ll can you compare 50k to 52K????

So where did the 48K in this post come from?

VIGILANT22 wrote: »

If the question was "I have a 50k deposit, should I deposit 48k and use 2k for fees or should I deposit 50k and add fees.....then it would follow logic and an answer could be given

I assume that it comes from subtracting 2K from this "one figure 50k". How does that differ from the 50K figure that I posit, which comes from subtracting 2K from 52K?

Let's revisit my initial post, rather than whatever crazy version of my original post you have invented yourself:

Two Buyers, buying a £100K house have (after paying everyone else their cut) £52K for deposit & bank fees. They are both getting a mortgage with fees of £2K.

Buyer 1 lays down a £50K deposit, borrowing £50K and paying his fees up front. The size of his loan on day 1 is £50K
Buyer 2 lays down a £52K deposit, borrowing £48K and getting the fees added to the loan. The size of his loan on day 1 is £50K.

And now, slowly, for the hard of understanding:

Both of them have 52K, neither of them have just 50K.

Got that?

One of them chooses to pay the fees out of that 52K, and as a result, only has a deposit of 50K

Yes?

The other chooses to roll the fees into his mortgage, and as a result, can use the entire 52K as a deposit.

OK?

The one who has a smaller deposit, must borrow 2K more to pay for the house, otherwise, the vendor would only get 98K, and that wouldn't do, would it?

However, although the one with the larger deposit only needs to borrow 48K in order to give 100K to the vendor, he also ends up borrowing 2K to pay the fees.

As a result, as far as I see it, everything is the same.

To put it in your own terms, how the h*ll are you able to compare 50K with 48+2K, but not 52K with 50+2K? What is the mysterious mathematical magic that makes these two pairs of figures so different?

Why is it that others seem to get it, and are capable of answering my question, but you persist with this nonsense about nothing being equal?

VIGILANT22

I didn't invent anything I copied from your post, No 4.

VIGILANT22

[QUOTE=barryireland_Why is it that others seem to get it,


????????..others??

flea 72
Quote Post 9
i think you have interpreted their advice too literally
Thrugelmir
Quote Post 10
In the instance you quote, your question is meaningless.

Thrugelmir

barryireland wrote: »

The same can be said of using a credit card to buy a £200 TV; and putting that same credit card in an ATM, withdrawing £200, and spending that cash on the same TV.

We all know that the latter course of action is ill-advised. So why is it meaningless to ask a similar question about a different form of borrowing?

From your most recent answer, I deduce that rather than, "your question is meaningless." you mean, "yes, you're right, they are exactly the same".

In that case, why is this piece of advice so widespread?

You have £200 to spend on a television. The sales person offers you a 5 year warranty for £20 on the television. (All warranties are the same price so there's no benefit from buying a cheaper television).

So you can either :-

a) Buy a television for £200 with no warranty.
b) Spend £180 on another cheaper television and buy the warranty for £20
c) Buy both the television and the warranty for £220.

Taking option (c) you don't have the cash. So put the additional £20 on your credit card and pay it off over the next 6 months, thereby incurring interest charges.

This is a similar combination of choices somebody buying a property has. Except the warranty reflects the mortgage fees.

Ritchie74

You'r right, in your example there would be no difference to total costs. However this is not the scenario under which people advise not to add fee's to their loan.
This advice is for the circumstance of a given loan amount.

Eg customer has requested a mortgage of £50k. Should they add the fee to the loan or pay up front. The answer is pay up front thus you don't incur interest on the fee.

By changing the loan amount as in your example, you are not comparing like-for-like.

dwsjarcmcd

I will throw a 'risk' issue into this. Some (but not all by any means) lenders will take the £2k up front as a fee which is non-refundable should the mortgage not be agreed or proceed for whatever reason.
So the person who pays the fee up-front risks losing it if they or the lender doesn't complete, the person who adds it doesn't.
Wth this scenario the risk free way to do it is to add the fee to the loan and if possible repay it on completion

_Andy_

Well, the OP really is a charmer.

Wutang_2

_Andy_ wrote: »

Well, the OP really is a charmer.

I like him - I also used to love going to Barry Island as a kid so maybe thats why..?

Lets put the fun back into fundamentals.

Anyway, has anyone heard of the National Hunters?

_Andy_

Wutang wrote: »

I like him - I also used to love going to Barry Island as a kid so maybe thats why..?

Lets put the fun back into fundamentals.

Anyway, has anyone heard of the National Hunters?

Never heard of it. Sounds interesting though. Any threads on it around?

getmore4less

It does not matter how you dress up the question or deal with the numbers

it makes no difference, the money either exists or it doesn't.