Which is better...Fee+Lower Rate or No Fee+Slightly Higher Rate

mintster

Currently looking at re-mortgaging. House value is £155,000 and outstanding mortgage is £85022 with 16 years left.

Looking currently at tracker mortgages (may fix later) and First Direct seem to come out on top.

First option is 1.79% (tracks at 1.29 above base rate) with £1123 setup fee.

Second option is 2.19% (tracks at 1.69% above base rate) with no setup fee.

Current mortgage is with C and G and tracks at 2% above base rate.

Am looking to overpay by 100% each month (although MSE says you cannot overpay on the first direct mortgage it does say on their website that you can).

Any clue as to which would be more beneficial?

amnblog

Sounds like it will take you about 40 months to get you fee back by utilising the lower rate.


0.4% rate difference X £85,000 = £340 = £28 per month


£28 X 40 = £1,120

marathonic

mintster wrote: »

First option is 1.79% (tracks at 1.29 above base rate) with £1123 setup fee.

Second option is 2.19% (tracks at 1.69% above base rate) with no setup fee.

Third Option to save £1123 - switch to the fee-free version and, as soon as the remortgage is complete, switch to the 1.79% version - which is fee-free for existing customers.

This is how I done it - the risk is that the fee-free 1.79% version for existing customers isn't available at the time your remortgage completes (leaving you stuck on the 2.19% rate - which isn't too bad anyway).

mintster

Clever Marathonic - typically how long does it take?

Also - where does it say no fee for existing customers?

mintster

amnblog - if I factor in overpayments will I make a saving slightly quicker as already dropping from 2.5% to 2.19% and overall the interest on oustanding debt will reduce quicker?

Please correct me if I have got this wrong - it is pretty confusing!

Thrugelmir

Don't overlook valuation fees, legal fees and existing mortgage redemption fees when calculating how long it will take to make a saving.

Also factor in the interest you would have saved by reducing your existing mortgage by £1,123.

marathonic

mintster wrote: »

Clever Marathonic - typically how long does it take?

Also - where does it say no fee for existing customers?

http://mortgages1.firstdirect.com/mortgage-rates/product/life-tracker-repayment--loyalty-fee-saver~132

mintster

I don't think there is a redemption fee and can't see any legal/valuation fees.

marathonic

mintster wrote: »

I don't think there is a redemption fee and can't see any legal/valuation fees.

The redemption fee would be with your existing lender. I paid no legal/valuation fees when I switched to First Direct's 2.19% fee-free deal.

getmore4less

Do the comparison properly it is easy enough

Add the fees make the payments the same and see what is left at a given time.

If overpaying use the total payment.

getmore4less

mintster wrote: »

Clever Marathonic - typically how long does it take?

Also - where does it say no fee for existing customers?

Some lenders close this loophole with a penalty period on their trackers.
(can still overpay)

Edit: Point being FD could do the same at some point.