Cashback or not?

rosie2424

Hi
I'm hoping that someone could give me a bit of advice, I have been sorting my mortgage out at the end of it's current offer period. In my current circumstances I have decided to stay with the same provider and have narrowed it down to 2 poss options -

a 5 year fixed rate at 3.09% (APR 4.4) with a fee of £499 and £1000 cashback on completion
OR
a 5 year fixed rate at 2.99% (APR 4.2) with no fee but also no cashback.

Over the 5 years I have worked out I would pay a total of £27159 (incl fee but minus the cashback) on 3.09% and £27360 on 2.99%.

I find it a surprise that the lower interest rate doesn't come out on top but is beaten by the fee and cashback!

The above assumes that I will just pay off the set payments per month, but I was hoping that when work is going well I will be able to pay off a little more each month so my question is - if I intend to pay off extra whenever I can afford to do it eg £50 - £100, should I go for the lower interest rate (2.99 as opposed to 3.09%) or will it not make much difference over the 5 years??

Thank you

Mortgage_Mark_2

0.1% difference in rate is negligible and with £501 net cashback you'll need a sizeable mortgage to claw back the difference.

Go with the higher rate, it's better value.

Also, ignore APR - meaningless for a mortgage as the only concrete facts are the next 5yrs, APR is worked out based on the entire term which could be anything in 5yrs time.

getmore4less

You cant just use what you pay you have to also look at what is left at the end of 5 years.

The way to work it out is take £501 off the mortgage @ 3.09% make the payments the same on both and see what is left in 5 years

missing either the rate or the term to do the numbers.

getmore4less

a 25y mortgage of £96265 that matches your monthly payments of £461 and £456

Borrow make the payments the same(£461) and the cash position the same(take £501 off the higher rate.) and see whats left in 5 years.
£96265 @ 2.99% £81973
£95764 @ 3.09% £81872

do the same for a 30year term
£108250 @ 2.99% £95888
£107749 @ 3.09% £95856

Very much depends what your mortgage and term

rosie2424

Hi
Thank you for the replies, my mortgage is 90800 and I have 23 years left.
It goes against what I think I should do picking the higher rate but if that works out the best then.....! :-)