Best Buy and Overall cost / Fees?

jawa1

Hello.

I am trying to understand the Overall cost for comparison often seen in best buy tables.
e.g
http://www.lcplc.co.uk/best_buys_1.aspx?id=0:21998&id=0:21990

Does the overall cost take into account the Initial mortgage rate the Subsequent mortgage rate and the Mortgage lenders fee ?

If you can switch for free say after 3 years then why does it really matter what the Subsequent mortgage rate will be? Surely when comparing the cost it should just be the Initial mortgage rate and the Mortgage lenders fee?

Martins guide at very good but don’t seem to explain how to compare the mortgages with different fees?

I am sure that’s what mortgage broker is there to sort out for you but I want to understand it better myself before looking into talking to a broker.

Robert_Sterling

jawa1 wrote:

If you can switch for free say after 3 years then why does it really matter what the Subsequent mortgage rate will be? Surely when comparing the cost it should just be the Initial mortgage rate and the Mortgage lenders fee?

Exactly right in my opinion.

I am in favour of having an AER covering the period you are actually signing up for not for and not for some other period.

jamesd

The subsequent rate matters if you can't switch. You might change jobs, get injured and be unable to work, build up a lot of debt or suffer some other factor that makes you or the property an unacceptable mortgage risk. Avoiding this need to remortgage when times are bad is one advantage of life of mortgage tracker mortgages.

jawa1

Can anyone help me with working out which is the better deal then? Assume I am going to switch straight after the deal period has finshed.

some fees hit the £1,499 mark.

Are there any online calculators to take into account only the initial rate and the fee.

AndrewSmith

That is exactly the job of a broker, to calculate a 'true cost' comparison based on both the assumption of remaining after the intial period, and assuming a switch after the intial period.

It involves calculator tapping and a piece of paper I'm afraid.

jawa1

As an example have I got this correct?
(using A&L 3 year fixed and 3 year fixed fee saver http://www.alliance-leicester.co.uk/mortgages/index.asp?page=fixed-)rates&buyertype=ntb&ct=movinghome

Loan amount £85,000
Fixed for 3 Years interest only with Fee.
4.99% with a £599 Fee added on to the total loan.
Monthly payment = £355.95
Total cost over 3 years £12,814.20

Fixed for 3 Years interest only without fee.
5.49% with a £0 Fee.
Monthly payment = £388.88
Total cost over 3 years £ £13,999.68


Total differance of £1,185.48 !

jamesd

Only right if you either pay cash for the fee or added the fee to the loan amount in the first calculation and not in the second.

MortgageGenie

It's a difficult one I'm afraid. This problem as recently highlighted in one of the mortgage industry magazines. http://www.mortgagestrategy.co.uk/cgi-bin/item.cgi?id=131778&d=pnd&h=pndh&f=pndf

Unfortunately there isn't currently any software/website that will calculate the true introductory interest rate for you on a whole of market basis.