Should I switch mortgages

My 5 year fixed rate mortgage is about to end.
I paid an arrangement fee to the Nationwide for their 5 year fixed rate mortgage at 4.99 percent.

The product fee is £900 and I need to pay £250 to Nram for a closure fee. Nationwide is offering free standard legal fees, but today I have received a solicitors letter letting me know all the other fees COULD incur.

Is it worth paying all £900 +£250(plus any other expenses?
Or should I stick with the standard variable rate?
The mortgage is for £44000 over 12 years (£506 a month) but I would like to pay it up over 5 if possible.

I would be grateful of any views on this.

Thanks

Replies

  • kingstreetkingstreet Forumite
    37.9K Posts
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Forumite
    For that sized mortgage, I'd say you should be avoiding fees wherever possible. The discharge fee for your current mortgage is unavoidable, but a £900 arrangement fee?

    I assume your property is worth more than £70k, so your LTV is 60% or less?

    The Nationwide deal costs as follows;-

    £44,000 @ 4.99% fixed for five years over 12 year term is £413 per month.

    £413 x 60 months = £24,780 + £900 = £25,680.

    On Trigold, the best fee-free five year fix for a case similar to yours is;-

    £44,000 @ 4.69% fixed until 30/4/2016 over 12 year term is £400 per month.

    £400 x 60* = £24,000 + £Nil = £24,000.

    £1,680 saving over the five years.

    Even using Nationwide's 4.39% market leading offer which applies to loans under 50% LTV, the payments and fee add up to £24,616, leaving you £600 out of pocket.

    The product for you is a direct product from NatWest, by the way. 10% overpayments are allowed each year. You'd have to save the remainder in an ISA to pay off the lump sum needed to redeem the mortgage at the end of the five years.

    *You won't make sixty payments as the term will be less than five years by completion, but this is used for ease of calculation.

    You mention concerns over the possible charges on a fee-free deal. Will any of them apply to you? I've only known additional charges to be made where the case was non-standard ie with a difficult lease, or transfer of equity.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • Thanks for the reply, It makes sense what you are saying.
    Nationwide allows you to overpay by £500 a month in effect making the mortgage term approximately 4 years 8 months if I £900 a month.

    My current lenders variable rate is 4.79 at the moment, but it can only go up. I do like my current terms and conditions ie unlimited overpayments and borrowing back when needed, so i have considered sticking with them on the variable rate.

    You seem very clued up on this have you any idea how much the interest rate could go up to make it worth while paying £1250 in fees (If you understand what I mean) Thanks for your help.:o
  • kingstreetkingstreet Forumite
    37.9K Posts
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Forumite
    ruby1966 wrote: »
    have you any idea how much the interest rate could go up to make it worth while paying £1250 in fees (If you understand what I mean)
    £1,250 spread over sixty months is £20.83 per month. On £44k, the interest difference is around 0.5%.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • ThrugelmirThrugelmir Forumite
    89.5K Posts
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Forumite
    ruby1966 wrote: »
    My current lenders variable rate is 4.79 at the moment, but it can only go up. I do like my current terms and conditions ie unlimited overpayments and borrowing back when needed, so i have considered sticking with them on the variable rate.

    Do NRAM still honour the "borrow back " facility?

    With a relatively small mortgage switching providers makes little financial gain. As your allowed to make unlimited overpayments best to keep doing this. Better use of the product and redemption fee money.
  • yes, NRAM say mortgage tems and conditions are still the same, providing your circumstances doesnt change.
  • dimbo61dimbo61 Forumite
    13.3K Posts
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Forumite
    Ruby do you want the security of a 5 year fix as this is little more than the SVR you are paying now ?
    Can you afford to overpay by £500 each and every month ? which the Nationwide deal allows.
    You could be mortgage free in 5 years and not have to worry about interest rate rises!
    IF you took the Nationwide deal and overpaid you would quickly build up an overpayment fund.
    Its £1150 to move and as kingstreet has pointed out thats 0.5% increase in the mortgage cost.
    So do you think interest rates will rise by 1% in the next five years?
    If you did OP by £500 a month you would need to stop OP,s in year 4 of your fix or face ERC because you would clear the mortgage before the end of the fix!
    Your Decision Good Luck
  • ruby1966ruby1966 Forumite
    4 Posts
    Thanks again for your replies. I have an appointment with the Nationwide on Friday. I just want to check about all the hidden costs first before I commit myself.
  • getmore4lessgetmore4less Forumite
    46.8K Posts
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    Forumite
    kingstreet wrote: »
    £44,000 @ 4.99% fixed for five years over 12 year term is £413 per month.

    £413 x 60 months = £24,780 + £900 = £25,680.

    On Trigold, the best fee-free five year fix for a case similar to yours is;-

    £44,000 @ 4.69% fixed until 30/4/2016 over 12 year term is £400 per month.

    £400 x 60* = £24,000 + £Nil = £24,000.

    £1,680 saving over the five years.
    That is the incorrect way to do comparisons, you have to do like for like

    The lower rate will be saving anyway. but for higher rates/lower fees this method can get the saving/loss wrong.


    To pay this £44k over 5 years at SVR would be £826pm.

    I would do the calculations over 5 years if that is the plan.
    A low rate tracker could look quite attractive if the fees are not too high.


    You seem very clued up on this have you any idea how much the interest rate could go up to make it worth while paying £1250 in fees (If you understand what I mean) Thanks for your help
    kingstreet wrote: »
    £1,250 spread over sixty months is £20.83 per month. On £44k, the interest difference is around 0.5%.

    Not quite right with that one you forgot the interest.

    With rate of 4.79% £23.47, also the 0.5% estimate is way out not sure how you calculated that.

    If your starting point is £44k @ 4.79% over 5 years @ £826pm then to compare with fees of £1250 easiest is assume rates don't move so that fixed rate do you need to break even over 5years

    £45250 over 5 years with a payment of £826 needs a rate of 3.64%

    So the rate needs to be at least 1.15% lower to make up the difference not 0.5%

    The other way is to say you fixed at 4.79% for a £45250 loan that would be £849pm for a £44k loan to cost the same thats would be a rate of 5.94% so rate up by 1.15%.

    Depending on how much different a fix is to the SVR this will change the movement needed to break even so a lower fixed rate will reduce the rate rise a higher fix will increase the rate rise.

    For this kind of term a lower rate(available with trackers) and overpaying can give significant savings if rates don't rise much(<4%).
  • kingstreetkingstreet Forumite
    37.9K Posts
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Forumite
    The mortgage is 12 years, not 5.

    If the OP wants to pay it off faster, that's her prerogative, but I didn't see her say she wanted the contractual arrangement to be for 5 years. I dealt with this issue in terms of overpayments in a similar way to how she would have had to approach the issue had she simply remortgaged to Nationwide with an intention of paying off the mortgage over five years.

    If she's looking for a five year fix, it seems eminently sensible to add together the five years payments and applicable fees to determine the overall cost of similar mortgage products over that period.

    As you may have noticed, I didn't work the figures for staying put versus Nationwide. I did them for a move to NatWest instead of Nationwide as this involved both a better rate and lower upfront costs and I believed this is what the OP wanted considered.

    If the OP wants a five year fix, those are the options. If she wants to stay variable with NR, that's her prerogative. I may have erred in not adding the Northern Rock figures too. :o

    On the £1,250 fees, I wished to highlight it would need only a 0.5%pa increase in SVR over a five year period to make payment of these fees worthwhile. £1,250 / 60 = £20.83 against £44,000 @ 0.5% = £18.33pm. It was designed to be a rough idea, rather than a to-the-penny calculation, so it was capital spread over five years versus interest paid on the other. She did not indicate she would add these fees to the loan, so I simply answered the question with a rough figure.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • getmore4lessgetmore4less Forumite
    46.8K Posts
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    Forumite
    If she's looking for a five year fix, it seems eminently sensible to add together the five years payments and applicable fees to determine the overall cost of similar mortgage products over that period.

    But you have to make the payments the same and see what is left after 5 years to do like for like it can make the difference between profit and loss.

    taking the example(obviously this one will be cheaper but by how much,

    The Nationwide deal costs as follows;-

    £44,000 @ 4.99% fixed for five years over 12 year term is £413 per month.

    £413 x 60 months = £24,780 + £900 = £25,680.



    On Trigold, the best fee-free five year fix for a case similar to yours is;-

    £44,000 @ 4.69% fixed until 30/4/2016 over 12 year term is £400 per month.

    £400 x 60* = £24,000 + £Nil = £24,000.

    £1,680 saving over the five years

    £44900 @ 4.99 over 12 years 415pm after 5y £29,378.80
    £44000 @ 4.69 paying £415pm after 5 years £27,602.32
    So more like £1776.


    On the £1,250 fees, I wished to highlight it would need only a 0.5%pa increase in SVR over a five year period to make payment of these fees worthwhile. £1,250 / 60 = £20.83 against £44,000 @ 0.5% = £18.33pm. It was designed to be a rough idea, rather than a to-the-penny calculation,

    Doing this with a 12 year term costing over 5 years

    £44000 over 12years @ 4.79% is £402.pm after 5 years £28,687.89 left

    £45250 paying £402pm to have £28,687.89 left after 5 years the rate needs to be 4.05% 0.72% less which 44% higher that your rough guess at 0.5%

    But since the OP intends to try and pay it off in 5 those numbers are critical to the process of deciding where to go.

    For a short term there would be a resonable case for a tracker at lower rates if LTV stacks up.

    right off on holiday for a while taxi has arrived.
This discussion has been closed.
Latest MSE News and Guides

Glitch hits Nectar bonzana

Did you miss out on bonus points?

MSE News

Ask an Expert: Scams

Watch MSE Katie's answers to your questions

MSE Forum

Hot Diamonds 40% off code

Including already-reduced outlet stock

MSE Deals