Help with confusing remortage numbers

JimmyTheWig

It's not the way I'd look at it, but I agree that's a valid way of working it out.

CFC

I admitted defeat and rang RBS explaining that it was not possible to compare the mortgages and there must be an error somewhere. The lady I spoke to worked out manually the £333 on the new offer was right, but she couldn't understand how I was paying £414 on the current one.
She has sent it to the investigation team to be looked at. I suspect that the terms of the two mortgages are actually different although they are supposed to be the same. I think something may have changed when I went into the 5 year fix originally.

Thank you for your input on this quite boggling maths!

I did very laboriously manage to calculate the capital in 5 years time which seems to indicate that I would save very little - not sure it is worth it but I'll wait and see what RBS come back with.

Sternmusik you clearly understand this a lot better than I do, I don't know if you make the actual saving to be only about £24 a month? I wouldn't invest any saving, it would all go back into the mortgage. I can overpay up to 10% a year of the capital outstanding without penalty. I would pay the ERC up front rather than add it to the mortgage.

JimmyTheWig

CFC, can I tell you how I would look at it?
I understand that this calculation isn't exact, as it doesn't deal with compound interest and the like, but it is close enough especially with a reasonably long mortgage term remaining.

Ok, my argument is that it doesn't matter how much you pay each month.
What??? Yes, I mean it! Because the capital part of your repayment reduces the balance of your mortgage balance.
So as long as you can afford the monthly payment, if one scenario has you paying more because you are paying off more mortgage, that doesn't matter.

All that you want to do is minimise interest and fees.

In yuor case, then, you have the choice between a rate of 4.19% and a rate of 3.09%. That's a difference of 1.10%.
1.10% interest on a balance of £44614 is £490 a year.
So it would take about 11 months to break even, having paid the £446 exit fee.

If these are both 5-year deals starting now then you can factor the saving against the full 5 years. And so after 5 years you'll be about £2,000 up by going with the lower interest rate. That's £33 a month.


But what isn't clear from your post is whether the "current deal" is a 5-year fix that you are in the middle of, in which case when does that end and what do you expect interest rates to be doing when that ends?