calculations for cheapest mortgage?

b56c

when comparing mortgages some include a fee and others dont. Will the APR quoted factor in the fee portion so that if the APR of products with and without a fee is the same, then the same overall amount will have been paid over the term? If this is so, then why would someone choose to pay a hefty fee up front for what amounts, in my case anyway on a mortgage of 30K, to a small reduction in monthly payments?

hcb42

depends on the reduction . Personally I avoid fee mortgages.

b56c

so, does the APR over the year or term factor in the fee? I'm still not sure.

kingstreet

APRs include the interest, any fee, valuation and legal costs as far as I remember.

As a broker I pretty much hold to the idea that no fee is better for mortgages under £100k and at £150k+ a fee with a lower rate may be better. The grey area inbetween varies and has to be calculated.

I just work out the total, or use what Mortgage Brain shows automatically.

kingstreet

C&G explanation;-

‘APR' stands for Annual Percentage Rate and takes into account all of the costs of a loan – giving you the ‘overall cost for comparison’. An APR is calculated in a standard way to allow you to compare different mortgage offers, including those from other lenders.

The APR includes important factors such as:

• The initial interest rate you must pay.
• How you repay the loan.
• The full length of the mortgage term.
• Frequency and timing of mortgage payments.
• Certain fees associated with the mortgage.
It is important to remember that these APRs are calculated using ‘average’ figures so each individual loan will have slightly different APR. The actual APR that will apply to your mortgage will be calculated when you get a personalised quote.

sterlingstash

I don;t think APRs are a good way to compare mortgages, as the fees are typically spread over the whole life of the mortgage. Previously, you could usefully compare the costs over the term of the product (ie the 2, 3 or 5 years of the tie in), assuming you would remortgage at the end, and you should probably still do this. But in these uncertain times, I would see the reversion rate as an important consideration too - in case you are not in a position to remortgage (falling house prices, change of circumstances etc).

There is no 'one-size fits all'. I'd place value on flexibility (overpayment/mortgage holiday) and a low reversion rate as being worth paying a slightly higher rate.

kingstreet

When suggesting a particular product be considered by a potential client, this is the information I take from the KFI;-

This is a Woolwich product fixed at 3.49% until 28/02/2014. There is no valuation, arrangement or legal cost to pay. The cost is limited to a £35 bank transfer fee and to a closing fee of £275 at the point you repay this mortgage, either by remortgaging or at the end of the term. The illustration quotes a cashback to you of £300 on top of the other transfer incentives I mentioned. There is a penalty should you wish to repay all or part of this mortgage before 28/02/2014. It's 3% of the amount repaid, plus the £275 fee for a full repayment making a possible maximum of £3,725. At the end of the fix, your rate reverts to Barclays Bank Base rate, currently 0.5% + 3.39% or 3.89% if your fix ended today. The penalty ends as the fix ends.

Woolwich will provide a Barclays Mortgage Current Account as part of the offer. Use of this account is purely voluntary and it can be used to drawdown a mortgage reserve which grows as your mortgage reduces.

The monthly payment for a 25 year repayment mortgage of £115,000 is £575.10.

That's initial rate, duration, initial fees, closing fees, cashback, penalties, reversion rate and monthly payment. This is an example I prepared earlier today. This accompanies the KFI which I send in advance.