Worth paying the mortgage fee?

laurieballard87

Hi

So we are due to remortgage for the first time since buying our house, currently on a 5% deal due to 95% help to buy.

Virgin Money seem to be doing good deals, the cheapest 2 year option with the £995 fee would bring our mortgage down £380 a month!

Anyway, the different between the 2 year fixed with a fee is £39 a month to the 2 year fixed without a fee. I make this £936 over 2 years so financially I am better off not paying the £995 fee as its cheaper not to bother?

I am umming and ahhing about going onto a 5 year deal but this works out £100pm without the fee and an extra £21pm with the fee.

Financially if we took the 5 year, I would pay the £995 as I would save a decent amount but on the 2 year, the math doesn't make it worth it.

Unless I am missing something?

Ta

laurieballard87

196 views and no replies.

Surely this is a fairly simple question?

Its just about the numbers right?

I have no interest in paying a mortgage broker for something as simple as a re-mortgage, I just want to confirm my thoughts were correct.

kingstreet

No. You need to know how much would be outstanding at the end of the fix and take that into account as well as the rate/interest and fees.

getmore4less

need more details like
the rates
how much you are borrowing
full term
how much you will/want to pay.

laurieballard87

On the 2 year fixed.

Value is £265k
Borrowing £208.5k

£995 fee at 1.68% initial followed by 4.54% standard variable. This is £910 per month.

Non fee is 2.08%, same variable and £949 per month.

The variable is 4.45% and even if rates rise say 0.5%, I would still be able to remortgage 2 years time and would still be cheaper than that variable they are offering.

If the variable is the same after the 2 years then surely the comparison financially is between the two initial values?

If the variable was say 3% ish and rates went up a little in the mean time, I may want to stay on the deal after the two years but I still think I will be better off remortgaging in two years again for a better deal.

dimbo61

If you take the 2 year deal with or without the fee then please overpay as much as possible over the next 2 years.
Your Loan To Value could be 90/85 or even 75% if you overpay every month !

getmore4less

Financially if we took the 5 year, I would pay the £995 as I would save a decent amount but on the 2 year, the math doesn't make it worth it.

what maths are you doing?

If the variable is the same after the 2 years then surely the comparison financially is between the two initial values?

it is and the result is

2y fix owing after 2 years
£208,500 @ 2.09% £949pm £194,154.05
£209,495 @ 1.68% £949pm £193,502.05

around £650 better off paying the fee.

if you want to just pay the fee and pay the normal amount based on 23y term

amount -rate -payment -owing -interest -total cost(with fee)
£208,500.00 1.68% £911.28 £193,393.01 £6,763.80 £7,758.80
£208,500.00 2.09% £952.14 £194,077.17 £8,428.52 £8,428.52

getmore4less

laurieballard87 wrote: »

196 views and no replies.

Surely this is a fairly simple question?

Its just about the numbers right?

I have no interest in paying a mortgage broker for something as simple as a re-mortgage, I just want to confirm my thoughts were correct.

when you don't understand how mortgages work it could be money well spent.

kingstreet

What is the loan to value being assumed here?

Presumably it's lower than 90%?

Now seen post #5, sorry.

getmore4less

Woops did 2.09% not 2.08% will fix when I get home.

edit

2y fix owing after 2 years
£208,500 @ 2.08% £949pm £194,113
£209,495 @ 1.68% £949pm £193,502

still over £600