Mortgage comparisons

purpleozzie

Hi there,

My mortgage is up for renewal, since we took out the mortgage we have got into a bit of debt, which is n ow being handled by payplan. So it's going to be extremely difficult to get a mortgage from anyone but our current lender..

Good news is there rates seem very good.. I am just unsure as to which of these is best..

1.) 2 year fixed - 3.09% - £995 arrangement fee

2.) 2 year fixed - 3.49% - £0 arrangement fee

3.) 5 year fixed - 3.89% - £0 arrangement fee

both these are over 28 years..

What confuses me is the arrangement fee, I can't afford to pay it upfront so would have to pay it over the course of the mortgage..

I just really wanted opinions (and people who are better at maths than me to crunch the numbers and tell me what looks the best deal and also how these deals stack up with what else is available on the market..

Crashandburn

It would be handy to know the mortgage balance so then people can work out whether it's better to do the arrangement fee or not.

kingstreet

The £995 fee effectively adds £41.45 a month to the cost of the mortgage. Choose whichever option leaves you with the lowest monthly cost once you've taken that into account.

That is a bit rough and ready, I know, as it takes no account of the interest you'll pay by adding it to the loan, but if it's obvious the no fee deal is better, you won't have to worry too much about that.

purpleozzie

Thanks for your responses..

The balance is 159,000...

option 1 is a monthly repayment of £692.10. option 2 is 725.91 and option 3 is 760.59..

I think option 2 is beeter than option 1 but what about option 3...

warwicktiger

If I knew what interest rates would be in 24-60 months time I could give you a definite answer, but unfortunately.............

Given that you cannot pay the fee up front ignore option 1.

Will you stay in the house for 5 years and therefore avoid any early repayment fees in the agreement? If yes, then the hard bit.

Take a view, take on board other peoples opinions and make your choice. Sorry I cannot give you THE answer.

kingstreet

If you add £41.45 to £692.10 it comes to more than the cost of the fix without the fee. Therefore, option one should be discarded.

How you choose between a two year fix and a five year fix depends on your view of future interest rates.

Your call, I'm afraid.

dimbo61

3.89% for a 5 year fix is to me a good long term fix with the size of mortgage you now have!
You really need stability for a couple of years to get your finances back on track.
How long is the payplan for ? How long before any bad defaults fall off your credit score ?
I have only recently finished a 5 year fix at 4.74% and I was happy with our decision at the time as we needed the security of a fix.
Two years will fly by and unless you can clear your debts you may struggle to get a good deal in 2 years time.
Consider how much you will have paid off in 2/ 5 years an what the LTV might be.
Good Luck on your decision