HELP - Which is better?

dan2014

Currently remortgaging to buy another property.

We have 40,000 outstanding on a home worth 260,000 and are looking to remortgage to get 110,000 extra (150,000 total).

We are currently with tsb bank and they have offered us a remortgage deal: 2 year fixed @ 4.99% then reverting to the base rate currently 3.9%.

The mortgage is interest only (selling the second property in 5 years time (recouping the 110,000) and the 40,000 will be paid off by us putting money in the bank each month to pay it off after the mortgage comes to an end).

If we could ignore the 40,000 outstanding and focus on the 110,000 as this what I'm confused about.

4.99% interest only on the 110,000 = 457 per month

However I saw another remortgage deal from HSBC which is fixed for 5 years at 3.29% for 5 years.

This makes the payments on the 110,000 loan = 302 per month.

The arrangement fees come to 1639.

But the difference with HSB would be 1860 in the 1st year, then subtract the arrangement fees to get a 221 saving. The saving would then be 1639 each year.

Is there any benefit to staying with TSB and paying 4.99% or is it much better to change to HSB even with the arrangement fees??

Please help! (and sorry for the long post)

Mortgage_Mark_2

Why interest only?

dan2014

Mortgage_Mark wrote: »

Why interest only?

We want to keep the monthly payments as low as possible.
We're selling it in 5 years time and aren't planning on making money from it, just recoup what we paid for it.

Mortgage_Mark_2

dan2014 wrote: »

We want to keep the monthly payments as low as possible.
We're selling it in 5 years time and aren't planning on making money from it, just recoup what we paid for it.

What do you have in place to repay the mortgage, outside selling the property?

You might find that you struggle to get an interest only mortgage without sufficient provisions to repay the mortgage, as sale of the property is not generally recognised as a suitable means of repaying the mortgage, unless its no more than 50% loan to value...

dan2014

Mortgage_Mark wrote: »

What do you have in place to repay the mortgage, outside selling the property?

You might find that you struggle to get an interest only mortgage without sufficient provisions to repay the mortgage, as sale of the property is not generally recognised as a suitable means of repaying the mortgage, unless its no more than 50% loan to value...

TSB are happy to approve the mortgage I detailed above and accept the sale of the property as repayment.
I just need help as to whether HSBC are a better option...

getmore4less

You can't ignore the £40k if you want to do the numbers properly

easiest way(subject to overpayment penalties) is....

Add the fees make the payment the same on both and wee whats left after the 5year plan.


you can ignore the repayment/interest terms and the full term of the loan.


It will get a bit more complicated if you can find savings rates better than the mortgage but for a first comparison you can ignore that.

getmore4less

two loans

£150000 at 4.99% for 2 years then 3.9%(variable) for 3 years
£151639 at 3.29% for 5 years

Target is £110k owing in 5 years so do the second first it is easiest
http://www.whatsthecost.com/mortgage.aspx
with a bit of iteration
Pay £1055 pm and after 5 years you owe £110011
(2 years owe £135800)

pay same on the £150k loan for 2 years then three years.

2 years(4.99%) £139140. (£3340 down)
5 years(3.29%) £116160. (£6149 down)