Which is the best mortgage rate?

Shipwrecked

Hi

Am hoping that someone with a better knowledge of mortgages (or just maths) may be able to help me...

I have found 2 mortgages and dont know which is the best to go with and why

Need 130000 mortgage, fixed for 2 years, repayment over 25years.

A) Rate 2.35% with £1995 arrangement fee
Rate 3.54% with no arrangement fee.

The advisor i saw worked out somehow that the higher rate is actually cheaper over 2 years (but calculated the fee of the first one over the 2 years rather than length of mortgage??)

I would appreciate advice as to which would be cheaper over 2 years (bearing in mind both will drop onto the same variable rate, and i could consider moving them if need be).

Hope that's enough info, and thank you in advance!

Thrugelmir

How you intend paying the fee makes a difference. Would you add it to the mortgage?

dlk

The 3.54% rate : Total interest over 2 years = £9204

The 2.35% rate : Total interest over 2 years = £6110 + arr fee £1995 = £8105

(the above calculations not taking into account the very slight interest difference due to any capital repayments in the first two years)


Your advisor maybe needs a little help with his maths too!

Shipwrecked

Hi
Thanks for replies

Thrugelmir - i would not pay the arrangement fee up front so i was told it was added to my mortgage and i assume over the 25 years.

The mortgage advisor is suggesting that with A, i will owe more after 2 years (as will have borrowed £131995 and the capital wont be much in the first 2 years)?

I am going to see the provider of rate A) tomorrow so hopefully they will want to 'sell' me theirs and will show me how that works out cheaper.