Compare the two mortgage

microbiology

Hi All

This is my first time posting here so pls go easy on me lol

I found 2 mortgages which I can take with my help to buy equity loan in the background.

My house value is £235,000 and current mortgage is £108,462. My mortgage is for 15 yrs

1.) 2.14 % no product fee 3 yrs fixed
2.) 1.68 % with £999 product fee 3 yrs fixed

My broker is insisting that I take out the 2.14% as it will be cheaper. I can't see how he's doing the calculations...

I entered the values on MSE calculator and it says 1.68% would be cheaper

Pls can anyone explain how?

Is the monthly repayment more important than the interest rate for the fixed time?

Thanks

enthusiasticsaver

I can't see how he has come to that conclusion either. Taking the 2.14% rather than the 1.68% means paying just under £500 more over the year so the product fee will be recouped after 2 years. Can brokers insist you take that recommendation? I would ask him to show you his calculations.

sungrad

Hey,

I'm just some random on the internet who's looking at mortgages at the minute, but I saw your question last night and signed up this morning just to reply!

I think the issue here comes from the fee, and whether you add it to the mortgage and pay it off over 15 years, or pay it off upfront.

If you pay it off upfront, for Mortgage 1 you'll have paid £171 less over the three years, but you'll have £564 more debt at the end.

Mortgage 1
Debt: £108,462
Interest: 2.14%
Upfront Fees: £0
Monthly Payments: £705
Total Cost Over 3 Years: £705 x 12 months x 3 years + upfront fee = £25,380
Remaining Debt After 3 Years: £89,458

Mortgage 2
Debt: £108,462
Interest: 1.68%
Upfront Fees: £999
Monthly Payments: £682
Total Cost Over 3 Years: £682 x 12 months x 3 years + upfront fee = £25,551
Remaining Debt After 3 Years: £88,894

Mortgage 2 with fee added to mortgage
Debt: £109,461
Interest: 1.68%
Upfront Fees: £0
Monthly Payments: £688
Total Cost Over 3 Years: £688 x 12 months x 3 years + upfront fee = £24,768
Remaining Debt After 3 Years: £89,713

I've no idea if that helps or makes things muddier, but that may be how your advisor is looking at it. I don't know if this is the right way to look at it or not, but definitely interested in knowing if you find out!

microbiology

Hi,

I did think that the 1.68% would be cheaper in the long run. This is what he said in the email:

The way we would compare is as follows:

My recommendation: 36 monthly payments @ £649.98 = £23399.28

1.68% deal = 36 monthly payments @ £628.88 + £999 arrangement fee = £23638.68

My recommendation would work out £239.40 cheaper. It is also worth noting that I have worked out the 1.68% broke down, i.e. you paying the fee up front rather than adding it to mortgage. If you add it to mortgage your monthly payments go to around £635 and your mortgage balance starts £999 higher and you pay interest on the £999 over the next 15 years.

Need to decide by tomorrow which one I am going for. Pls can someone help me understand these calculations

JimmyTheWig

microbiology wrote: »

My recommendation: 36 monthly payments @ £649.98 = £23399.28

1.68% deal = 36 monthly payments @ £628.88 + £999 arrangement fee = £23638.68

I can't get these figures from what you said in the OP.
How much are you going to borrow?
How long for?

microbiology

The mortgage broker used £100,000 figure as he thought we were only borrowing this as opposed to £108,462

getmore4less

microbiology wrote: »

Hi,

I did think that the 1.68% would be cheaper in the long run. This is what he said in the email:

The way we would compare is as follows:

My recommendation: 36 monthly payments @ £649.98 = £23399.28

1.68% deal = 36 monthly payments @ £628.88 + £999 arrangement fee = £23638.68

My recommendation would work out £239.40 cheaper. It is also worth noting that I have worked out the 1.68% broke down, i.e. you paying the fee up front rather than adding it to mortgage. If you add it to mortgage your monthly payments go to around £635 and your mortgage balance starts £999 higher and you pay interest on the £999 over the next 15 years.

Need to decide by tomorrow which one I am going for. Pls can someone help me understand these calculations

The broker is incompetent get a new one.

They have not taken into account the amount of the mortgage that is left after 3 years.

Also if you have the money and pay the fee upfront you can borrow £999 less on the no fee deal

if the rates are
1. 1.68% £628.88 £999 fee
2. 2.14% £649.98 £0 fee

That looks like £100k over 15 years not £108k
(is that another error by the broker?)

With £100k and those rate after 3 years you owe
1. £81,962 (£512 less which is bigger than what he says you save with the no fee)
2. £82,480

add the fees and make the payment the same for the same cashflow.
payment £650.00
1 £82,233.56
2 £82,479.21

fee based you owe £245 less for the same amount of money from your pocket.

OH and one more complete bit of nonsense coming from the broker.

you pay interest on the £999 over the next 15 years.

BY making the payment the same you have paid off the £999 in 30 months and start saving for the last 6

microbiology

getmore4less wrote: »

The broker is incompetent get a new one.

They have not taken into account the amount of the mortgage that is left after 3 years.

Also if you have the money and pay the fee upfront you can borrow £999 less on the no fee deal

if the rates are
1. 1.68% £628.88 £999 fee
2. 2.14% £649.98 £0 fee

That looks like £100k over 15 years not £108k
(is that another error by the broker?)

With £100k and those rate after 3 years you owe
1. £81,962 (£512 less which is bigger than what he says you save with the no fee)
2. £82,480

add the fees and make the payment the same for the same cashflow.
payment £650.00
1 £82,233.56
2 £82,479.21

fee based you owe £245 less for the same amount of money from your pocket.

OH and one more complete bit of nonsense coming from the broker.



BY making the payment the same you have paid off the £999 in 30 months and start saving for the last 6

Hi,

Yes, he calculated it based on £100K but I need £108,462

Would 1.68% still be the best deal?

amnblog

Barclays rates and the industry software probably shows your Broker £705 pcm on the higher rate and £682 pcm on the lower rate.

Total to pay over 3 years including fees

£26,356 on the higher rate no fee

£26,563 on the lower rate with fee

microbiology

amnblog wrote: »

Barclays rates and the industry software probably shows your Broker £705 pcm on the higher rate and £682 pcm on the lower rate.

Total to pay over 3 years including fees

£26,356 on the higher rate no fee

£26,563 on the lower rate with fee

Can you explain how you worked out the above figures for 3 yrs

Thanks

getmore4less

microbiology wrote: »

Hi,

Yes, he calculated it based on £100K but I need £108,462

Would 1.68% still be the best deal?

he told you which is best for a mortgage you won't be getting.