Is lower rate better on large loan?

chelseablue

Fix isn't up until March but starting to look around at rates.

Currently with Halifax, on 1.49%. Current balance is £220,000 and the monthly payment is £720

Halifax are offering 1.59% to switch to a new deal with them, monthly payment would increase to £760

Looking at the Best Buy tables, we could move it to Santander where the rate would be 1.09% and monthly payment of £710
Although the product fee is £1,499

Obviously the benefit of staying with Halifax is not much hassle and no fees

Is the general consensus to go with the lowest rate possible on our size loan, even with a high fee?

wacky75

you need to add the fee to the term of the mortgage, then divide by the term.

e.g. if this a 2 year term, 1499 / 24 = 62.46 (+710) = 772.46 per month

chelseablue

wacky75 wrote: »

you need to add the fee to the term of the mortgage, then divide by the term.

e.g. if this a 2 year term, 1499 / 24 = 62.46 (+710) = 772.46 per month

Thank you! Never thought of doing that calculation


Yes it is a 2 year rate, so in the example I used we would actually be better of staying with Halifax.


So what I really need to find is a lower rate with no fee? Or a fee that makes the monthly figure over the 2 years less than £760 a month.


Because if we re-fix every 2 years the fees soon add up!

AnotherJoe

I dont think you can just do that calculation. Dont you also need to know how much is owing at the end of the 2 year term?

Lokolo

A very basic example as I am not counting the reduction of the capital. But if you are using the same term, this won't make a difference.

Halifax interest over 2 years is £6,996
Santander interest over 2 years is £4,796. Add the product fee. Total is £6,295.

Therefore over 2 years you would save ~£700 by moving to Santander assuming no other costs.

Tammykitty

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


A calculator which shows how much you will pay, and the mortgage left at the end of the period

getmore4less

chelseablue wrote: »

Fix isn't up until March but starting to look around at rates.

Currently with Halifax, on 1.49%. Current balance is £220,000 and the monthly payment is £720

Halifax are offering 1.59% to switch to a new deal with them, monthly payment would increase to £760

Looking at the Best Buy tables, we could move it to Santander where the rate would be 1.09% and monthly payment of £710
Although the product fee is £1,499

Obviously the benefit of staying with Halifax is not much hassle and no fees

Is the general consensus to go with the lowest rate possible on our size loan, even with a high fee?

add the fees make the payment the same see what's left at the end of the promotional period

a rough calculation is to use interest only and see the saving in interest

0.0159-0.0109*220,000= £1100py so after 2y about £700 saved

it will be a bit less as you ere on repayment and that does not take account of the fees but not by a lot.

eg after 2 years
£220,000 @ 1.59% £760pm £208,583
£221,499 @ 1.09% £760pm £207,947

£616 saving.

getmore4less

wacky75 wrote: »

you need to add the fee to the term of the mortgage, then divide by the term.

e.g. if this a 2 year term, 1499 / 24 = 62.46 (+710) = 772.46 per month

that does not work as it implies the fee based is more expensive when it's not..

lower rate pays off more capital

amnblog

Have you also considered the 1.24% Halifax rate with the £999 product fee?

getmore4less

eg. after 2 years
£220,000 @ 1.59% £760pm £208,583
£221,499 @ 1.09% £760pm £207,947

£220,999 @ 1.24% £760pm £208,087

£130 more but easy switch and no risk of other costs(like the exit fee).

chelseablue

amnblog wrote: »

Have you also considered the 1.24% Halifax rate with the £999 product fee?

Is that just for new customers?