deals and fees

motor_bike

hi,

just looking at current deals as my mortgage deal ends this month. i am planing to stay with my current lender because im self employed and wont have to submit accounts etc. i know if i was a new customer i might get a better deal, but all products or deals seem to have a fee or the rate is higher if no fee . if you where to switch every year or two you would be paying an average of £1000 every time you switch . i have 30k owing and say i could manage 10 years to get monthly payments down to around £250 per month . if i switched every 2 years 1t would cost 5k or 10k for the 10 years if you switched every year and this is added on to the total payment . is this correct ? , if so the one year 2 year deals may not be as good as they seem ??

ACG

It is all about doing the sums, if you have a £500k mortgage, the chances are it is better to pay the fee and get a lower rate, the opposite is true on smaller mortgages. Somewhere in the middle the 2 will meet.

motor_bike

i do actually owe 30 k and if fixing every 2 years then yes it will cost me 5k more over 10 years. just looking at life of mortgage deals which the bulk of are tracker and the fixed ones are around 2.5% plus the 1k set up fee . i would have to submit accounts for a new lender and may incur a corp tax bill as i would probably have to increase earnings to make it look like i can re pay. as a small business/self employed most try to keep earnings down to avoid corp tax and so on, but when it come to borrowing it makes things a bit harder and might cost you more money. you cant win lol

getmore4less

you have to look at both the rate and the fee across the relevant period.

There are plenty of no fee products about but the lower rate with fee may be better depending on the difference in rate and size of fees.

there is no rule you have to look at each deal

For a £30k debt there will be few side by side deals where the fee version is better, very unlikely anything 5 or under, there are some 10y deals where the break even fee/no fee is very low but not seen one as low as £30k yet.

The reality is with £30k the differences over 10y are not that big so a low cost tracker or 10y fix may just make life easy.


£30k 10y
rate, payment, total interest

1.5% £269 £2325
2.0% £276 £3125
2.5% £283 £3937
3.0% £290 £4762

motor_bike

getmore4less wrote: »

you have to look at both the rate and the fee across the relevant period.

There are plenty of no fee products about but the lower rate with fee may be better depending on the difference in rate and size of fees.

there is no rule you have to look at each deal

For a £30k debt there will be few side by side deals where the fee version is better, very unlikely anything 5 or under, there are some 10y deals where the break even fee/no fee is very low but not seen one as low as £30k yet.

The reality is with £30k the differences over 10y are not that big so a low cost tracker or 10y fix may just make life easy.


£30k 10y
rate, payment, total interest

1.5% £269 £2325
2.0% £276 £3125
2.5% £283 £3937
3.0% £290 £4762

if you are fixing every 2 years with a fee of around £1000 does this not add on to the end figure ? . e.g. say you had a loan of 10k over 10 years with 2% , that would equal total repayment of £12000 . if the 2% deal only lasted 2 years and to renew the deal every 2 years at a cost of £1000 the total would be £17000 after 10 years . have i done my sums right ??
i think what im saying is , for small loans over short terms the deals are not that good due to the average £1000 set up fee, also i would have to keep submiting accounts every time i switched so i could get the deals at sub 1.7% ( this would be a no brainer to me if i didnt have to submit accounts) with no set up fees

there are some life of mortgage deals at around 2.5% with a £1000 ish set up fee and if i change lenders i could get a 2 year deal at sub 1.7% with no fees but i would have to submit accounts and again would have to work out if i saved anything doing this by working out the total figure

here are my working outs based on 10 years

30000 at 1.7% total repayment is 35100 ( no fees for switching every 2 years and if very lucky stays at 1.7%)

30000 at 2.5 % total repayment is 37000 (no fees, fixed for the full term)

this is my current lenders best offering 30000 at 1.74% fixed for two years with a £995 set fee , so if this stayed the same for the 10 years fixing every 2 at the same rate same deal

£40220 total
have i worked it out right ??

getmore4less

you have to run the number for each option.

your assumption +£1k every change is flawed.