Silly question about mortgage comparison

TenBubbles

I know I sound dumb and I am not sure which figure to look at in order to select the 'best mortgage deal' overall, as opposed to the 'cheapest' one??

I was given a list of 3 products:
Product 1: Fixed Rate, rate: 3.19%, Until 02/12/2017, APR: 4.2%, Lender fee: £1495, Monthly payment: £750.33
Product 2: Fixed Rate, rate: 2.69%, Until 31/12/2014, APR: 3.8%, Lender fee: £999, Monthly payment: £717.15
Product 3: Tracker, Rate: 3.29%, Until 31/12/2014, APR: 4.00%, Lender fee: £1499, Monthly payment: £757.07

I am CONFUSED....I know no one here is allowed to tell me which one to go for, but can anyone lecture me on how to compare?

Also, I assume that if we choose 25 years instead of 20 years, we will end up paying more for sure, right?

Any help please?? :A:A

chewback

You can't compare them becasue they all offer different things. It's like comparing apples, oranges and bananas. Firstly, do you want a fixed or tracker mortgage? Once you know this, how long do you want the fix or tracker? Once you know this you can then compare

TenBubbles

What a dumb question that I asked! Thanks for replying. That makes sense. :beer:

Let me rephrase my question:
What figures do I need to look at/what calculation do I need to do in order to figure out which one of the two fixed rate products (suppose they have the same product term) is a better choice overall? Is APR figure the sole deciding factor?

harvey115

You need to provide more details in order to get a good response such as borrowing amount

Personally if you are looking to fix for a period, I would suggest that you choose the five year deal (option 1) as opposed to a 2 year deal. Simply because now is a good time to fix if you are considering one as rates would only be on the uprise rather then going further down.

Hope this helps.

sunshineholiday

When comparing the fixed rate mortgages, you are paying for the security of having a fixed rate for a longer term - i.e the promise of fixed payments for an extra three years in the case of product 1;

Indeed, you are paying £496 pounds extra in set up fees, and very roughly £33.18 x 24 in monthly payments up to Dec 2014...


The question is, is the security of the fixed rate worth it?


Or do you go with the security of fixed for two years, and look to change then...


This is all very quick sums, so excuse any errors!


Also, I am not a financial consultant!! Get advice from a professional!


John

TenBubbles

Hi Harvey,

Thanks for replying.

Additional information: The purchasing price of our ideal property is 270k and we are looking at borrowing 133k. Mortgage terms: 20 years.

I'm not sure about the 'Monthly Payment' figure. Is it the average monthly payment taking into consideration the fixed rate and the rate after fixing for 5 years?

TenBubbles

sunshineholiday wrote: »

When comparing the fixed rate mortgages, you are paying for the security of having a fixed rate for a longer term - i.e the promise of fixed payments for an extra three years in the case of product 1;

Indeed, you are paying £496 pounds extra in set up fees, and very roughly £33.18 x 24 in monthly payments up to Dec 2014...


The question is, is the security of the fixed rate worth it?


Or do you go with the security of fixed for two years, and look to change then...


This is all very quick sums, so excuse any errors!


Also, I am not a financial consultant!! Get advice from a professional!


John

Thanks for the input John. Much appreciated! :j

GMS

You need to firstly decide on the product type, i.e fixed or tracker. Don't attempt to compare against each other as one could change and the other can't.

Then consider length of product, i.e 2,3 or 5 year fixed, or a tracker for x years or a lifetime one.

Once you decide then compare costs.

Cheapest rate is not always best deal. Work out the fees. If the product has a £995 (for example) arrangement fee will you save this over the period when compared to a fee free product?

Look at valuation fees too. Is a free valuation product better than one with a valuation fee to pay.

Are there any incentives such as free legals or cashback? Could this make a difference to the overall numbers?

Look at revert rates. Although you can look to change at the end of a deal you may incur costs so consider the revert rate. Is it set against bank rate of lender standard variable. Does it look in line with others?

At the LTV you are looking at, assuming criteria is met you should have the pick of the best rates.

As odd as it sounds it can be better going for a higher rate sometimes when looked at overall.

chewback

APR is an irrelivance as it assumes you are going to keep the mortgage for the full term. When, in reality most people remortgage after their fixed rate has ended.
Therfore, to compare to mortgages with the same fixed term all you need to do is multuply the monthly mortgage payments by the fixed term and then add and fees. You may also want to compare what rate your mortgage will revert to as you may not be able to remortgage in 5 years time.

TenBubbles

You all are a star!! Thank you very much! :j