do i add the fee or pay it, what is cheaper

stolt

hi there im stuck trying work out what is cheaper, to add the arrangement fee or not.

ive been on a fixed mortgage for 5 years and coming to the end of that, its 187k and im looking to overpay on my mortgage each month, the rate is lower than what im currently on so i'm keeping the payment the same to overpay plus im going to put more in each month.
As there are no penalties either so i can grab a fixed rate as and when they the rates increase.


the deals are
2yr base rate tracker 1.24% above base (currently 1.74%) and there is a £999 fee but no penalties.

and
Lifetime tracker 1.99% above base (currently 2.49%) No fee, and no penalties


is it cheaper to add the fee to the mortgage or have a mortgae with no fee..

thanks

ClareTeaches

I'm not sure which would be cheaper, but our mortgage consultant at Halifax could go through their system to work out what combination of products and fees would give us the best deal for our circumstances (mortgage amount, interest rates, mortgage length, etc). It took into account monthly payments and the total we'd repay.

For us it worked out cheaper overall to go for a product without a fee, but I would think your consultant should be able to do similar calculations and show you the different results.

Brighty

Use a mortgage calculator. Basically you want to compare a 187k mortgage at 2.49% and a 188k mortgage at 1.74%. Exact saving will depend on the term, but by my calcs you would be about £60 per month better off on the 1.74% with fee, saving you £1440 over the course of the 2 year deal, or allowing you to over pay by the same. Only downside is you will have to remortgage again in 2 years.

Brighty

jimclark1967

If we look at the 2 year timescale of your 'with fee' option, the £999 fee equates to additional £500 per year.

To work out what the 'without fee' rate would have to be to be a better overall option:

500 / 187000 * 100% = 0.27%

i.e. the fee adds approx 0.27% to the effective interest rate making the total 1.74+0.27 = 2.01%

Which is still better than the fee free option at 2.49%

In general, higher mortgage balances mean a discounted product with fixed fees will more likely work out better. Opposite applies for small mortgages.

amnblog

Under new MMR rues you cannot add the fee without the consequences being explained to you.

We have a guide sheet - PM me if you want a copy.

getmore4less

add the fees or pay

no difference

if you have the money add the fees and borrow less

stolt

thanks for all replying in such detail and helping explain it. Maths was never my strong point.
The current plan in my head anyway is to keep on this deal for a year and overpay as much as i can and then look at fixing in a years time (as i can gather thats when rates will possibly start to increase)

I've just paid my car loan off so i can probably over pay each month by £500-£700 a month including the difference between the two mortgage payments right now because of the lower interest rate) so i will be tryign to overpay each month.

the only alternative was to fix now and get one that i can overpay but generally they have a percentage only on overpaying and thats it.

getmore4less

to compare deals add the fees make the payments the same and see what is owing

getmore4less

amnblog wrote: »

Under new MMR rues you cannot add the fee without the consequences being explained to you.

We have a guide sheet - PM me if you want a copy.

it makes no difference you either have the money or you don't.
if you don't you have to borrow them if you do have the money you either pay the fees or borrow less and add them

dimbo61

Your mortgage is for more than 2 years!
What does the 2 year tracker deal revert to after the 2 years SVR?
Perhaps the long term tracker may save you money over the next 20/25 years!

stolt

dimbo61 wrote: »

Your mortgage is for more than 2 years!
What does the 2 year tracker deal revert to after the 2 years SVR?
Perhaps the long term tracker may save you money over the next 20/25 years!

hi yes its over 25 years but i want to over pay for the year as much as i cn and i;ll look at fixing it then. thats why i thought perhaps a fixed rate could be better if i could overpay and be safe.