Arrangement fee vs Interest Rate

ezman

Hi, just looking for some advice on renewing my mortgage vows
I owe 115,000 on a 27yr term repayment mortgage.
I'm going to stay with halifax (i've left it too late!) and i want to do a 2 year fix.
There are 3 options i' m looking at
5.49 for a £499 arrangement fee
5.69 for no arrangement fee
or 5.29 for £799 arrangement fee.
I'm going to have to add the fee to the mortgage
Now I realise that the 5.29 mortgage even including the fee means i pay the least to the bank in the end.
But as I'm only doing this for 2 years would it make more sense to get the 5.49 rate and just pay £499???

I'm so confused even I don't know what I'm on about now :rolleyes:

I don't deserve any help but it would be most appreciated!

Poppycat

Hey cant offer you any advice on mortgages for me they are confusing but dont say you dont deserve no help, we all need help from time to time, good luck anyway

Ian_W

Look at the monthly repayments on each one and see which is the cheapest when you add the fees to the 5.29 and 5.49 ones, as if those fees were being paid monthly - which of course they're not. All other charges being equal that should tell you which is going to be the cheapest over the 2 yrs.

So over 24 months paying an upfront fee of £799 adds the equivalent of £33.30 to your monthly payments or the £499 adds £20.80. I suspect with a fairly large mortgage the bigger fee will be cheaper over the term but without knowing the monthly repayment you'll have to do the maths I'm afraid.

If they're very close then you're probably better going for the no fee option as you won't then be paying interest by adding the fee to your loan.

HTH.

regularsaver1

The fee is added at standard variable rate of 7% = so remember this on your calculations

ezman

Hi thanks for the replies. Justw anted to point out that the arrangement fee is added at the product rate (two separate advisors have assured me of this). I don't know why some people seem to have been charged the fee at the standard rate but they say this is not the case.
In the end I went for the higher interest rate with no fee. I'll owe less on the mortage at the end of the two years than if I'd paid either 499 or 799 for a lower interest rate.

KTF

If you want a copy of my spreadsheet them let me know.

regularsaver1

ezman - I work there

however, there is a way round it - that me what they have done then

ezman

thanks KTF, i used a spreadsheet from this site...
http://www.mortgagesexposed.com/Book_Contents/spreadsheet_summary.htm
I have to say it was an eye opener to see I'd be left owing more at the end of 2 years if I had paid to go on a lower interest rate but now I see it makes sense. (At least I hope I've done my sums right!)

regularsaver1
Yeah it was weird, it sounded as if they don't get asked often - the first adviser said I had to state I wanted the fees added on and paid at the same rate, the second implied it's always at the same rate??? Either way, I'm not paying fees so it doesn't apply to me now, thanks for the word of caution though.

regularsaver1

its a computer thing lol