Lower Rate with Fee Vs Higher Rate without?

pablo1979_2

Hi

I've been on the phone to Nationwide this morning to reserve a decent fixed deal before the inevitable rate rises.

Fortunately, I'm just under the 70% LTV line and looking at a 3 or 5 year fix on a mortgage value of c.£113k with 19.5 years to run.


They've offered products with and without their £999 arrangement fee (which can be payable up front or added onto the mortage - I've disguared the "add-on" to mortgage option) as follows:

• 3 years - 3.89% with £999 fee upfront
• 3 years - 4.19% no fee
• 5 years - 4.49% with £999 fee upfront
• 5 years - 4.69% no fee

I've done a basic calculation to work out which is the cheaper option over the term of each fixed deal. In both cases the no fee option works out cheaper (3yr - £350, 5 yr - £250).

Is there anything else I should be considering here or are there any general "rules of thumb" I can apply? (for instance would my mortgage balance oustanding at the end of the fixed period be different depending whether I go for the fee option or not?).

Any thoughts appreciated

Thanks

Gorgeous_George

pablo1979 wrote: »

Hi

I've been on the phone to Nationwide this morning to reserve a decent fixed deal before the inevitable rate rises.

Fortunately, I'm just under the 70% LTV line and looking at a 3 or 5 year fix on a mortgage value of c.£113k with 19.5 years to run.






They've offered products with and without their £999 arrangement fee (which can be payable up front or added onto the mortage - I've disguared the "add-on" to mortgage option) as follows:

• 3 years - 3.89% with £999 fee upfront
• 3 years - 4.19% no fee
• 5 years - 4.49% with £999 fee upfront
• 5 years - 4.69% no fee

I've done a basic calculation to work out which is the cheaper option over the term of each fixed deal. In both cases the no fee option works out cheaper (3yr - £350, 5 yr - £250).

Is there anything else I should be considering here or are there any general "rules of thumb" I can apply? (for instance would my mortgage balance oustanding at the end of the fixed period be different depending whether I go for the fee option or not?).

Any thoughts appreciated

Thanks

I add the fee to the mortgage in order to compare 'like for like'.

3 years
3.89% You pay £695.84 per month and owe £101,561 after 3 years.
4.19% You pay £707.55 per month and owe £101,016 after 3 years.

Assuming both mortgages revert to 5% after the fixed term, I make it that you save £380 over 19.5 years with the 4.19% deal.

5 years
4.49% You pay £732.03 per month and owe £93,492 after 5 years.
4.69% You pay £737.81 per month and owe £93,018 after 5 years.

Assuming both mortgages revert to 5% after the fixed term, I make it that you save £322 over 19.5 years with the 4.69% deal.

GG

getmore4less

£113k 19.5y 234m

To do like for like you need to add on the fees(or take them off the no fee)
You also need to make the payments the same.

1. £113999 3y - 3.89% £696 pm
2. £113000 3y - 4.19% £708pm

Pay both at £708 after 3 years
1. £101,097.39
2. £100,998.52

So only around £100 in it

1. £113999 5y - 4.49% £733pm
2. £113000 5y - 4.69% £738pm

pay both at £738pm after 5 years

1. £93,091.58
2. £93,004.44

Around £90 on this one.

kingstreet

The fee v rate argument is more pronounced on two year products than it is on three to five year deals.

dimbo61

are you planning on staying for at least 3/5 years in the property.
will you be overpaying
what will the ltv be after 3/5 years
both deals give you long term security