new deal help

completelybroke

Hi,
I'd love a bit of help. I'm sure I might be asking a silly question but I'd really appreciate some advice,


I'm trying to sort out a new mortgage deal as our current deal comes to an end at end feb. I only have the option of a new deal with my current provider

The options are....

Number 1: 2yr fixed at 3.19% with a £799 arrangement fee (options, pay up front or to be added to mortgage) gives a monthly repayment of £1085.35 (fee added to mortgage figure)

OR

Number 2: 2 yr fixed deal at 3.49% with £0 arrangemnt fee = monthly repayments of £1098.87

3yr fix (not sure about fixing for this long) 3.59%, £0 arrangement fee, repayments per month of £1105.53

Questions

Which 2 yr fix is better. On 1st sight lower payments per month of £13 odd seems better, it's lower!

BUT say consider fact of paying fee upfront and not adding to mortgage then clearly daft as £13more over 2 years is much less than the £799 fee for the lower interest rate so the No2 mortgage is better.

BUT does adding the fee onto the mortgage make NO1 the better mortgage?. The figure of £1085.35 is figure with £799 added on the remaining life of the mortgage - 13 years. I figure £799 create extra interest of £25.49 per year (at rate of 3.19 - we won't always have this rate!) plus obviously it creates more capital, albeit over the term of the mortgage (the £799) to pay too

I could go round in circles! I also have in mind in 2 yrs it may be a case of adding yet another fee to the mortgage for the remaining term!

so which is better?

Many thanks for any help.

kingstreet

Which lender? What's the follow-on rate in February? What will the follow-on rate be in two years time if you pick one of these fixes?

completelybroke

these are the figures to start end feb. The follow on rate in 2 years time would be the variable rate at the time unless I found a new deal in 2 years. Both these 2 yr fixes I mention are currently lower repayments than by current deal soon to end. if I don't chose a deal then I'll plop onto the variable rate at next month, currently 4.99% with my lender.

kingstreet

Ok - so it's standard variable rate this time and still standard variable rate in two years.

In that case, I'd say take the fee-free fix of the two year options. Over the two years, you'll pay £320 more, but won't have £800 added to your mortgage for the remaining term.

The three year fix is only something you can decide on. Plenty out there think rates will be higher in two years, so a third year may be sensible. However, it means a repayment penalty commitment for a third year and if there's anything in your make-up which says you might need to make mortgage changes within that extended period, a third year may not be sensible.

Your call, I'm afraid.

completelybroke

Thank you, that's helpful.

With a bit of luck in 2 years I can get current accounts straight and be able to shop around more for an even better deal rather than relying on a deal my current provider may provide.

With the 2 or 3 year fix deal I pondered wither at the end of 3 years if interest rates did go up whether they might be higher at the end of 3 years rather than 2, so maybe fix for longer in 2 years time? Deciding on the 2 or 3 years is a gamble and only hindsight in 2 or 3 years will let me know what was right.

MRG

You mention that you need to improve your current account etc.

Is this something that makes you feel like you can't go to another lender?

Have you explored this possiblity?

completelybroke

yes, the current accounts are overdrawn

Thrugelmir

completelybroke wrote: »

yes, the current accounts are overdrawn

Maybe better to take the 3 year fix then. At least then you'll know what your outgoings are while you tackle your other issues.

MRG

My point is if your current accounts are within your agreed overdraft limit you aren't harming your credit so other lenders may be an option.

I would say its worth having a look around, if you find a better deal elsewhere its worth trying for an agreement in principle. That way it doesn't cost you anything to find out if you can get the deal or not.

completelybroke

MRG wrote: »

My point is if your current accounts are within your agreed overdraft limit you aren't harming your credit so other lenders may be an option.

I would say its worth having a look around, if you find a better deal elsewhere its worth trying for an agreement in principle. That way it doesn't cost you anything to find out if you can get the deal or not.

thank you, they are within agreed overdraft limits. I just thought when you have to send off so many months/years of bank statements it wouldn't be an option.
I'll have a look around

MRG

Lenders will usually ask for Payslips and Proof of address & ID etc

Sometimes they may ask for bank statements but if your credit is not in a bad way ie defaults etc, they have no reason to.

The good thing about getting a better deal elsewhere means you can put more money aside for clearing your overdraft.