How often should you look to remortgage?

xiledlanc

My current mortgage product is due to end in a couple of months and now I am looking at options to continue to get a good deal.

I currently have 18 years left on my term, but have been overpaying at a rate that would equate to taking out a 15 year re-mortage. Reading the MSE articles, it would seem I am better to keep a longer term and continue to overpay to get flexibility - fair enough.

However looking at some of the options around you incur reasonable costs to remortgage (a 0.99% rate from HSBC costs c.£1800 in fees).

Therefore is there any advice / calculations for working out if you are better paying a slightly higher rate on a longer deal (3 or 5 years) and incurring reportage costs less often? Or getting the best rate possible but accepting a higher number of fees over the years?

frazell

http://www.moneysavingexpert.com/mortgages/compare-mortgage-rates

ACG

Fees are not charged on all mortgage products. Its a case of doing the sums. Lenders have different offers but the 0.99% deal was probably a mrketing thing more than anything. However, in order to recoup some of the money they are missing out on by offering a very low rate, they are making back by charging a high fee.

Its important to do the sums as the cheapest rate is not always the cheapest deal.

xiledlanc

Thanks for the replies.

The calculator is OK, but it doesn't do an assessment assuming that you will always re-mortage when your product ends.

I am comfortable doing an assessment of a low rate but high fee vs the opposite, but what I am trying to work out is the Whole Life Cost of differing product lengths assuming I will always look for the best deal at the end of it.

Based on current circumstances I'd hope to be able to clear the debt in around 12 years. I could do that by a number of options:

1) Pick the best 10 year rate and stick with it for the duration. This has a really low fee (£30) but would see my monthly payments at £1250.

2) Pick the best 2 year deal currently (accounting for fees / rates). This has a really low monthly payment (£1080) but high fees (£1800) and remortgage every 2 years.

Option one would cost me about £1,000 a year more for each of the next 2 years. But over the course of 10 years, the continual costs associated with fees etc start to make it less clear.

My OP was one to understand if anyone had done / read any analysis on what the optimal length of time to take a product out over was?

getmore4less

You have to crunch the numbers

After the first short deal you are into speculative territory as the rates and fees are unknowns.

The second issue is that over time your debt reduces so the fees become harder to recover through a lower rate.


The basic calculation is add the fees, make the payment the same and see whats left.

run 5 x 2y deals against a 10y deal.

..........
Be careful of the MSE calculators they are not always correct and and can be misleading the one linked above leads the reader to think the total cost is the difference which is wrong, you have to adjust that number for the amount owing.

ACG

I suspect there will be a deal that is a higher rate without a £1500 arrangement fee that would be cheaper.

To put it in to context, if you chose a product with no arrangement fee, the monthly repayments could be £60+ a month more and it would still work out cheaper. Thats assuming you pay it upfront, if you add the £1500 fee you are also paying interest on it. You need a hell of a big mortgage to find paying a £1500 fee on a 2 year deal is the cheapest option.

getmore4less

Paying fees up front makes no difference to the comparison.

You either add the fees or reduce the borrowing on the non fee option

Fee recovery is not just based on mortgage size the rate differential is also a factor.