Mortgage interest rate v admin fee

Looter

Hi, my wife and I are first time buyers and we're trying to work out what the best mortgage is for us. The top mortgage fix in the weekly email is just 1.48% with a £2494 admin fee, but many mortgages have a much lower fee but the interest rate is higher.

Is there some kind of formula to work out which is best? I'm thinking that the bigger the mortgage, the low interest rate option is the one to go for. Sorry if this seems a dumb question but it seems a bit complicated to us!

Thrugelmir

Post some figures up then we can comment further.

kingstreet

The size of the mortgage and the duration of the offer will be key.

On a two year product, you'll need a big mortgage to make paying £2,500 worthwhile, as that is effectively adding £104 per month to the monthly cost (£2,500 / 24 months).

If it's for five years, the impact is spread over a longer period and may therefore be a decent buy even on a medium-sized mortgage.

To work out the best deal, we calculate the cost of the mortgage interest and any added fees over the term of the offer, taking into account the capital repaid by the end of the offer period.

Do that for a couple of deals and you'll see the difference.

20vt-rs

Also take into account your LTV at present, and if in x years you'll be in a better bracket. As you may want to re-mortgage anyway sooner than you think for a better deal on a lower LTV. Use a calculator to help you predict your LTV in a few years time and go from there using, the above as well, definitely important!

amnblog

I don't think you should be picking your own product.

As first time buyers, see a broker and get some sensible advice.

davilown

amnblog wrote: »

I don't think you should be picking your own product.

As first time buyers, see a broker and get some sensible advice.

There's nothing wrong with FTBs doing it themselves as long as they have done some research, as the op is.

amnblog

FTB's in the main do not understand the market and the hits and hurts

We brokers are constantly picking them up and dusting them off after fruitless and damaging attempts at self service

4pudding

I've been dividing the fees by the number of months in the initial period (e.g. two years fixed, 24 months) and adding this onto the monthly payment for comparison.

dimbo61

So you are trying to save £12K in 2013 ? Deposit?
£2500 is a HUGE fee to pay for a mortgage so I hope it is a £250/300K mortgage.
If you are borrowing a hole lot less then a fee free deal might be better for you.
Now we know nothing about you or your family! Income, job, savings, area, type of property you are looking to buy so how can we offer help?

hcb42

4pudding wrote: »

I've been dividing the fees by the number of months in the initial period (e.g. two years fixed, 24 months) and adding this onto the monthly payment for comparison.

also consider the ERCs

hcb42

amnblog wrote: »

Some FTB's in the main do not understand the market and the hits and hurts

We brokers are constantly picking them up and dusting them off after fruitless and damaging attempts at self service

Edited that for you.

That might be true, but not everyone needs a broker. It is not beyond the wit of man to be able to work these things out on your own, even when a FTB.