Switching mortgage every 2 years

inzimam

Hi all

I'm trying to figure out what is the best option if I'm remortgaging now with a 2year tracker but intend to move house in 1.5 years time so will incur some kind of early exit fees. Value of the mortgage is £145k

Is it better to either:
1) Take a mortgage with interest rate of 1.29% with a £1100 arrangment fee and 1% early redemption fee, or
2) one with 1.45% rate, no arrangement fee and a 0.5% exit fee

The broker has confused me, stating that option 1 is cheapest. She must be calculating over the lifetime of the mortgage which is 20 years right?

Please help me with my sums!

Thanks

glentoran99

Pick one that will let you port your mortgage with no fee

kingstreet

I would ask for a product with no early repayment penalties, like another tracker. There are a couple of the top of my head.

Then you aren't stuck with the same lender or early repayment penalties if they won't lend the amount you need next time; have no decent product; or they won't lend due to some other issues, such as the property type etc.

getmore4less

inzimam wrote: »

Hi all

I'm trying to figure out what is the best option if I'm remortgaging now with a 2year tracker but intend to move house in 1.5 years time so will incur some kind of early exit fees. Value of the mortgage is £145k

Is it better to either:
1) Take a mortgage with interest rate of 1.29% with a £1100 arrangment fee and 1% early redemption fee, or
2) one with 1.45% rate, no arrangement fee and a 0.5% exit fee

The broker has confused me, stating that option 1 is cheapest. She must be calculating over the lifetime of the mortgage which is 20 years right?

Please help me with my sums!

Thanks

Over 20y the payment on the higher rate would be around £696

in 2 years you would owe

£146,100 @ 1.29% £696pm £133,004
£145,000 @ 1.45% £696pm £132,326

2nd option better by £678


even if you paid the fee up front and just did the normal repayment.

£145,000 @ 1.29% £685.77pm £132,124
£145,000 @ 1.45% £696.36pm £132,317

2nd option better by

£1100 - (696.36-685.77)*24 - (£132,317 - £132,124) = £653.84

get your broker to put in writing why option 1 is cheaper over 2 years

Thrugelmir

getmore4less wrote: »

Over 20y the payment on the higher rate would be around £696

in 2 years you would owe

£146,100 @ 1.29% £696pm £133,004
£145,000 @ 1.45% £696pm £132,326

2nd option better by £678


even if you paid the fee up front and just did the normal repayment.

£145,000 @ 1.29% £685.77pm £132,124
£145,000 @ 1.45% £696.36pm £132,317

2nd option better by

£1100 - (696.36-685.77)*24 - (£132,317 - £132,124) = £653.84

get your broker to put in writing why option 1 is cheaper over 2 years

OP is looking to exit the mortgage in 18 months. Therefore ERC would be payable.

Mortgage_Adviser

As kingstreet says, why are you not looking at the products with no early repayment charges?
Are you circumstances meaning the only above lender available?
The decent rates quited suggest you do not have adverse credit etc/
Are you looking to swithc products with existing lender and ca not remortgage because of your affordability no other lender will accept your business?

inzimam

Thanks for the replies everyone

It's remortgage with debt consolidation and borrowing more. I understand that's not ideal but I've looked into options and it's the chosen one. Just need to find the cheapest way.

Im a bit annoyed that the broker is giving me wrong advice. I don't think I will proceed with them now.

As mentioned in the thread, it means no sense to take on a mortgage with £999 fees even if I plan on keeping it for the full 2 years. The mortgage broker is clearly calculating the cheapest option by spreading the arrangement fee over the lifetime of the loan and not just 2 years. Terrible advice!

getmore4less

Thrugelmir wrote: »

OP is looking to exit the mortgage in 18 months. Therefore ERC would be payable.

Start with the easy one for the broker to explain away their suggestion the fee one is better.


If the one with the higher ERC is worse over 2years it will be even more expensive after 18m and ERC.