Mortgage rates and fee's confusing me!

matt1987

Hi All

So I haven't had to change provider by myself for a while as I have always had a broker for this for me - which means I have never had to pay a fee or solicitors fees etc.

However, my broker has got back to me with some figures a few days ago for my mortgage that's due for renewal in October. I have done a bit of my own research this time round, and have found cheaper prices with other providers, however they all charge a fee.

We have a bit of a difficult year coming up as we are expecting in October too and therefore for the 12 months that follows our income will suffer, however we have savings to still live comfortably.

I have only ever taken out 2 year fixed rates. This time round I am also going to take an extra £4k or so out the house as I want to create the loft into a storage room.

Our house is worth £300k and after borrowing another £4k, I want to take out a mortgage of £180k giving us 60% LTV over 26 years.

Now I have been getting rates of £687 a month with HSBC but with a £1499 product fee (the monthly rate incorporates this fee). The only other fee payable is £30 money transfer.

I have then seen a 5 year fixed with HSBC with the same fee's, for a monthly payment of £721.

I cant work out exactly what's best? Mortgages that have no fee seem to be so much more expensive per month (a 2 yr fixed without adding a product fee is around £30 a month more expensive!!).

Any advice appreciated :money:

[Deleted User]

No fees are generally best for lower balances. For £180k or thereabouts I'd imagine paying the fee would be best value for you. If you've explicitly said you don't want to pay a fee, this may have impacted your brokers recommendation

Have a play with https://www.moneysavingexpert.com/mortgages/compare-mortgage-rates/

One word of warning, getting it wrong can cost you hundreds (if not thousands) overall - I'd go back to your broker and say "I've found X, please confirm why you've not chosen that for me"

I've found they're normally very upfront about why they haven't selected a rate for a client - it could be that lender is inundated at the moment (therefore a very poor service to you, so they're avoiding them) or something like the affordability calculation meaning you pass at X lender but fail at Y lender.

If you go it alone and get it wrong, it's a big mistake.

Afterall, I believe brokers have to justify why they aren't picking the lowest/cheapest rate these days - so they have likely considered whatever is truly cheapest and decided against it for whatever reason.

ACG

It is not this simple, but if you go for a 2 year fix and the repayments are £30 a month more when you do not pay a fee, that is £360 a year or £720 over 2 years.

So by not paying a £999-1499 fee, you are paying £720 in interest, so although it is £30 a month more, it is still cheaper. There is more to it than that - for instance, if you add the fee, your balance goes up and you pay interest on that.

Do not get caught up in the rate, have a look at the whole deal. Is there cashback, is it free valuation and free legals, how long are you tying in to the deal for, How much is the fee? £1499 fee is quite high.

However, you say you are expecting, you might actually prefer lower monthly repayments even if it costs you a little more in the long run. We have a 2 year old, we now also have childcare costs and my Mrs works part time, so we did actually go with a lower rate despite the fee which was more expensive overall, but when it finishes we will have 30 hours free childcare and be around a thousand pound a month better off...

amnblog

This is a case where you need to discuss this with your Broker.

Otherwise you could shoot yourself in the foot.

getmore4less

You can't use the change in payment to work out the difference.

You get closer using the difference in rate on the loan and period but that will still be out.


Adding the fee or not makes a tiny difference to the comparison.

matt1987

Thanks for all your advice, it’s much appreciated. It’s such a minefield out there!

All of the products Iv looked at include free Sols and Valuation.

Obviously with our circumstances over the next 12 months especially we would rather have lower monthly payments, however those fees are ridiculous and I’d have to add them to the balance as I don’t have spare thousands of pounds lying around to spend on a product fee (that needs to go on baby items :rotfl:).

I have my current lender calling me this evening, however I doubt they will be able to offer anything better as they aren’t showing up on any comparison sites.

My broker is back in on Monday so I won’t be doing anything hasty and will ask them to look at products that have a fee but which I can add to the mortgage too, along with free solicitors and valuation fees.

getmore4less

Post the details of the deals rate and fees.

Current lender?


HSBC £1499 fee 1.31%
£999 fee 1.34%
£0 fee 1.69%

After 2 years adding the fees

£180,000 1.69% £713.33 £168,783.60
£180,999 1.34% £687.36 £169,202.36
£181,499 1.31% £686.72 £169,624.52

The £999 fee is the one that has the lowest net debt after 2 year.

You can't recover the extra £500 fee with a 0.03% difference in rate.

If you want a lower payment delay paying the mortgage with longer term.

matt1987

getmore4less wrote: »

Post the details of the deals rate and fees.

Current lender?


HSBC £1499 fee 1.31%
£999 fee 1.34%
£0 fee 1.69%

After 2 years adding the fees

£180,000 1.69% £713.33 £168,783.60
£180,999 1.34% £687.36 £169,202.36
£181,499 1.31% £686.72 £169,624.52

The £999 fee is the one that has the lowest net debt after 2 year.

You can't recover the extra £500 fee with a 0.03% difference in rate.

If you want a lower payment delay paying the mortgage with longer term.

Thanks ever so much for this, so I suppose it does make sense for the £999 fee product!

My current lender is Bank Of Ireland and their rates aren’t that great currently.

I’ll have a better idea of what the BOI can offer later and I’ll post here, along with what my broker found.

Thanks again guys, so helpful!

matt1987

So heres the current situation:

My broker found me the following:

Santander 2 yr fix with no product fees at 1.69%. Payments would be £713 a month with £168,779 owing at the end.

I then went onto London and Country website and they have thrown up the following:

2 yr fixed with no product fee at 1.63%. Payments would be £708 a month with a balance of £168,693 at the end of the 2 years (Don't know the lender)

or

5 yr fixed with £995 product fee added to the mortgage at 1.71%. Payments would be £719 a month with free valuation, sol fees and £250 cashback. Owing at the end of 5 years would be £152,123. (Don't know lender).

What do you all make of these? It appears to be a better rate than my broker? Do anyone have any experience with London and Country?

Thanks

Matt

[Deleted User]

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