Help choosing a mortgage - going crazy!

carotearoa

Hi everyone,

Very grateful for any advice on this, as I've given myself a massive headache trying to work it out...

I do actually have a mortgage broker, but he is utterly pants and I wish I hadn't bothered (ie. he keeps telling me there is no difference between overpayments reducing the monthly payments or reducing the term).

I am in the process of arranging a mortgage at 50% LTV. I have started applying for the Coventry 1.99 7 yr fix as it was the best available offer, however I have today found something better and am panicking that I've made a bad decision.

Nationwide are offering 1.89% 5 year fix. Obviously this will be a little bit cheaper anyway, and I'm as happy with a 5 yr fix as a 7 yr anyway. Fees are the same.

My current mortgage is with Nationwide and they've always been really good, so I would have preferred to stick with them (but at the time their rates were much higher). One big pro for them is that they recalculate the term of the mortgage following any overpayment over £500, whereas for Coventry it's 3 x the monthly payment (a lot higher!) so we would realistically need to save up our overpayments for quite a long time to hit the 'capital repayment' mark.

Can anyone suggest an online tool or anything that would allow me to compare these two mortgages, where I can also factor in potential overpayments?

Another possible reason to stay with Nationwide is that I owe £96k on my current mortgage at 2.84% and would have to pay 4k ERC if I left. I think I'm actually still better off paying that and moving to the new product even if I stay with them, but just considering.

Lastly... Having now applied for the CBS mortgage, can I pull out without losing any money? They have instructed a valuation, so there may be a charge there. Would it be terrible to have the two credit searches? I think we otherwise have good scores.

Sorry for all the questions, but very grateful for any advice anyone has!

carotearoa

The other thing I should have mentioned is that Nationwide's current follow on rate is lower - 3.74 as opposed to 4.24 with CBS.

Does anyone actually take note of the follow on rates anyway, or do you just assume you'll be able to get another introductory product?

getmore4less

You have a few things

If you are in a current penalty period you need to compare any change over the same period to do a comparison.

Recovering £4k on £96k mortgage with a <1%(2.84%-1.99%) difference will need a few years are you sure you will be saving money?.

How long till penalty free and any other fees?

That is easy enough to do, add the fees and see how much is left at the point you would be penalty free.

nationwide probably won't let you change even with a fee.

On the reduce term or payment there can be a difference but the reality is the term is not relevant as long as you can make an equivalent payment without penalty this tends to only become a problem if also making regular overpayments near a the limits.

if you are not 100% happy with the broker if on the payment of arrangement fees they think paying the fees up front saves money their competence is very suspect.

Follow on rates can be important as changing lender may not always be possible but while there are often retention deals without checks this is less of an issue if you consider the lenders retention deal policy/history.

carotearoa

Hi there,

thank you for your reply. We have two months to go until the ECR drops to 3%, which would be £2,820. It staggers down by 1% each year after that for the remaining 3 years.

Can I ask what you meant by this?

if you are not 100% happy with the broker if on the payment of arrangement fees they think paying the fees up front saves money their competence is very suspect.

I don't think I mentioned this in my original post, but he has advised us that we are better off adding the arrangement fee (999) to the mortgage, rather than paying upfront, as we wouldn't lose it if the purchase fell through. I have always been of the 'pay it upfront, so you don't pay interest' mindset, but thought his opinion here sounded sensible.

amnblog

This is all a little confusing.

You are taking a hit of 3% on a 2.84% rate to get 1.89% for 5 years. At best you'll probably just break even on the redemption fee.

Adding the new product fee so as 'not to risk it if the purchase falls through' when you would be refunded anyway.

Talking to the broker about a 7 year rate and then looking up 5 years rates on your own bat.

Wanting to overpay and not agreeing with the broker about whether a shorter term is preferable to overpayments.

I can see something going wrong here unless you get advice from a broker you can feel confident in.

carotearoa

Yeah, to be honest I definitely don't feel like I've found myself a good broker, but not really sure how we can get out of using him now. I'm using a fee-free broker who is paid via the commission.

I'll see if I can find a local FA for some real advice. Thank you

amnblog

"Thank you, but I want you to stop working on my case as I have no confidence that you know what you are doing"

getmore4less

obviously you would not change for another 2 months.

What has you broker given you showing the savings over the 3 years till penalty free?

looks like your choices are
stick with current deal(ignoring 2 more payments and a little round down based on your ERC prediction.)


1. £94000 @ 2.84%
add the ERC
£96820 @ 1.99%
woops forgot to add the £999 fees
2. £97819 @ 1.99%

Iinterest only, around £223pm after 3 years

1.£93,980
2.£95,566

about £1590 worse off after 3 years

if repayment it will be higher
eg if you go from £96k -> £94k in 2 months say £1000pm

1.£64,817
2.£66,766

in 3 years about £1950 worse off.

getmore4less

even if nationwide let you switch fee free in 3 years paying £233pm

1. £94000 @ 2.84% £93,980
2. £96820 @ 1.89% £94,211

Still £230 worse off.

getmore4less

carotearoa wrote: »

Can I ask what you meant by this?

if you are not 100% happy with the broker if on the payment of arrangement fees they think paying the fees up front saves money their competence is very suspect.

I don't think I mentioned this in my original post, but he has advised us that we are better off adding the arrangement fee (999) to the mortgage, rather than paying upfront, as we wouldn't lose it if the purchase fell through. I have always been of the 'pay it upfront, so you don't pay interest' mindset, but thought his opinion here sounded sensible.

That's a false assumption

if you have the money up front the other option is borrow a bit less and add the fees which results in the same debt so no more interest.

the add the fees so you don't pay them if the mortgage does not happen is OK as an additional reason to add but as it cost nothing extra(actually saves a tiny amount) you should be adding them anyway.

RhysHSCC

you won't have to pay the fee if the valuation takes place, there's no upfront booking fee so there won't be a cost should you wish to cancel the application now.