Which would you choose??

DanielRichards

Hi there, if anyone could offer a little advice on this please, we'd be most grateful!!

Sat down with the Mortgage Advisor today and have chosen a mortgage which seems good, but there was an alternative, and i fancy checking to see what you all think, as its our first and i don't want to make any mistakes this early on!

1st Mortgage is over 30 years, 133,000 with 20,000 deposit at 4.49% with an arrangement fee of £3324 added to the mortgage, which means repayments of £600 per month. We chose this as it lets us on the ladder with not too much difference from the rent we pay now.

However, 2nd mortgage was 133,000 with 20,000 deposit at 5.2% which makes our repayments £670 per month

Question is, are we being daft accepting the first mortgage with the arrangement fee even though it reduces our monthly repayments. Does it affect the amount of equity we can build?

Forgive me if none of this makes sense, like i said its our first, and we're learning!

Thanks in advance for any advice

Dan.

herbiesjp

Would you be paying the arrangement fee up front or adding it to the loan?

[Deleted User]

An arrangement fee of over £3k?

DanielRichards

Yuo, Arrangement fee will be added to the term of the mortgage.

herbiesjp

Are those 2 years fixes?

You are paying £70 pm more - so over 24 months that would be an extra £1680 you pay on the higher rate. However you would be paying an arrangement fee of £3324 for the benefit of the lower rate.

It does not look like the savings you are making on the lower rate will make it worthwhile

These would be different if the fixed rates were for longer

HTH

dukesy_2

http://www.mortgagesexposed.com/

follow the "online tools" section and input both sets of figures into the "Any loan calculator"

This is BRILLIANT, as it allows you to see the ACTUAL IRR (The actual rate of return)

This (for example ) allowed me to see that a 5 year fix with 6% cashback, at 7.14% actually costs 5.58% over the 5 years...Which is on a par with the 5 yr fixes with no cashback (but the cashback is coming handy for my personal circumstances)

HTH

Dukesy