Adding fees - am I being thick?

blueste

Thank you for your quick and simple to understand explanations. I should have mentioned, I am planning to over pay by £200 a month. (If I took the fee product I would have to "pay" my savings back the £999 So would probably overpay by £100 for the first 10 months)

Would overpaying as described above change which deal I should go far? I envy your mathematic skills!

amnblog

The more you overpay, the less the fee product makes sense.

Lower lending makes the rate less important in relation to the fee.

AnotherJoe

blueste wrote: »

Thank you for your quick and simple to understand explanations. I should have mentioned, I am planning to over pay by £200 a month. (If I took the fee product I would have to "pay" my savings back the £999 So would probably overpay by £100 for the first 10 months)

Would overpaying as described above change which deal I should go far? I envy your mathematic skills!

As amnblog says the more you overpay the less the product fee makes sense. You need the fee to be cancelled out by higher interest (not rate, the actual amount) being paid on a larger sum. If the sum is smaller it's more difficult to compensate for the fee and overpaying reduces the amount you owe and therefore how much interest you pay.

getmore4less

Add the fees make the monthly payment the same see what's left.

It is that simple.

elbii1

I am remortgaging for the first time and would appreciate some help with the maths.

I have a mortgage of roughly 200,000 and am looking to remortgage from 4.29% to either a 1.74% w/ NO FEE or 1.29% w/£1450 fee.

I will also need to pay ERC of roughly £4000.

Interest difference is (4.29-1.74) = 2.55. Can I use the same method as given above? The interest difference is much larger.

Thanks for your help!

amnblog

You are giving away 2% on the early redemption charge before you start. That is worth 1% a year on a two year product.

The difference between the two rates is 0.45 which is £900 a year against a £1,450 fee.

elbii1

Thanks, amnblog.

How do I factor in the impact of the ERC?

amnblog

If you drop the rate by 3% to 1.29% you are saving 3% of £200,000 every year.

3% x £200,000 = £6,000

ERP £4,000 and new product fee £1,450 = £5,450

Puts you in profit from around month 11.

getmore4less

elbii1 wrote: »

I am remortgaging for the first time and would appreciate some help with the maths.

I have a mortgage of roughly 200,000 and am looking to remortgage from 4.29% to either a 1.74% w/ NO FEE or 1.29% w/£1450 fee.

I will also need to pay ERC of roughly £4000.

Interest difference is (4.29-1.74) = 2.55. Can I use the same method as given above? The interest difference is much larger.

Thanks for your help!

you are basically looking at 3 different borrowings at 3 rates.

1. £200000 @ 4.29%
add ECR
2. £204000 @ 1.74%
add fees
3. £205450 @ 1.29%

your payment depends on term
the different only using % works it out for interest only mortgages

£200k I/O would £715 over 15y around £1500

paying £715pm after 1 year you owe
1. £200,000
2. £198,930 ( £1070 break even is m10)
3. £199,486( £514 break even is m11)
3-2 break even is m20 £40short of m19

paying £1500pm after 1 year you owe
1. £190,393
2. £189,434 ( £958 break even is m10)
3. £190,010 ( £382 Break even is m12)
3-2 break even is m21.

For more marginal cases the payment is needed to do a like for like.

getmore4less

blueste wrote: »

This has got me thinking, I am switching to a 2 year tracker borrowing £110500 with 16 years left on the term. Could someone smarter than me do the maths on which of the following is the cheaper option and explain why?

£999 product fee
Base rate +0.89%
£639.73pm

No product fee
Base rate +1.24%
£659.76pm

Both the above monthly re-payments are based on a base rate of .50. When my deal starts in September it will obviously be .25

paying £660pm in two years
£110500 @ 1.49% £97,772
£111499 @ 1.14% £98,055

£333 better off no fee.

overpay by £200pm total £860pm
and the new numbers are
£92,903
£93,202

Saving reduced to £299