Adding fees - am I being thick?

getmore4less

ed67812 wrote: »

Spoke to a lender on the phone today.
I am looking to borrow £188k on a tracker.

There are two options for me
-2 year tracker at 1.94%, fee free.
-2 year tracker at 1.54% with £999 fee.

(These rates reduce 0.25% in Sept when base rate fall filters through).

I was surprised when the adviser told me that the fee free deal was better value over the two years. I just cannot see how that could be the case and the figures that I have come up with are

Fee Free
£706. 79 per month
£16969 over the two years
£178,153 balance remaining after 2 years.

Fee £999
£670.15 per month
£16082 over the two years
£17081 over the two years with the fee paid upfront.
£177,552 balance remaining after 2 years

Therefore, the fee based mortgage is £112 more expensive over the 2 years, but the remaining balance is £601 less after the 2 years. Therefore the fee based mortgage is much better value.


The adviser, who entirely got my point of view, explained that he understood where I was coming from, but the calculation that he has to use is working out the difference in the monthly cost and multiplying this by 24.

Unless I am missing something, that calculation takes no account of what the remaining balance will be, which is absolutely key in showing which is best value.

Am I missing something?

paying £707pm in two years
£188000 @ 1.69% £177,213
£188999 @ 1.29% £176,757

£456 better of with the fee