Product fee and eventual cost

MrCH

Hi all,

My NatWest deal is due for renewal and I can ‘switch’ deals from today.

I’ll be going for a 5 year fix, 90% LTV, 25 year term.

The two options I have are

2.81% £541 p/m £999 product fee
3.74% £605 p/m No product fee

I don’t have £999 in cash at the moment so will probably add it to the mortgage over the term.

How much would that £999 cost me in the long run?
I’ve googled quite a bit and can’t find a calculation to see how much it would be.

Tom99

You will pay 3.74% - 2.81% = 0.93% extra interest each year if you go for the 'no fee' option.
That equates to a mortgage of about £21,500 so if you are borrowing over £21,500 you will save money going for the £999 fee option.
If say you had a £100,000 loan then your extra interest on the no fee option would be approx £4,500 over the 5yr deal.

ACG

Did you do your original mortgage through a broker? It might be worth going back to them (or any broker), I read the other day that if you do a product switch with natwest through a broker, there are better deals than if you go direct - I am not sure how true it is I have not checked myself but it might save you a few quid doing it that way.

MrCH

Thanks for that Tom.
Outstanding is £126k.

If my parents were to give me the £1000 as a gift and I used that for the fee, is there a way of calculating how much I would save by not adding it to the mortgage but paying it off upfront?

I’m not sure if I’m thinking that the £1000 might equate to something like £3000 after interest when added to the mortgage when I could pay it off upfront and obviously save the £2000 off the whole term cost.

kingstreet

Don't forget, the product with the lower rate will result in a lower outstanding balance at the end of the fixed rate, so you need a proper comparison, not just the fee in isolation.

MrCH

Thanks ACG. I did initially go through a broker yes at a cost of £300.

kingstreet wrote: »

Don't forget, the product with the lower rate will result in a lower outstanding balance at the end of the fixed rate, so you need a proper comparison, not just the fee in isolation.

That’s what I am currently trying to work out and was going to reply with

There’s a MSE comparison which gives an option of NatWest 2.38% with £558 a month through a broker (£167,926 over 25)

whereas my switch through my Natwest login is

2.81% with £545 a month (£176,096 over 25)

getmore4less

Adding the fee or not makes little difference to the real relative cost comparing the options.

you either have the money or not.

You are not paying it over the full term compared to not paying the fee as you get a lower rate to compensate.

By borrowing the money from somewhere else you are just borrowing less from the bank.

Why not get £2000 from them to save even more or all £126k then no need for a fee


Natwest have 90% LTV rate of 2.40% with £995 fee through brokers.

Natwest hide their retail rates for product transfer on the retail web site.


I think there are a couple of slightly(0.1%) better options out there if you change lender, will depend on the other fees to switch.

MrCH

Just compared the two rates on landc’s website and over 60 months 2.31 will cost £34,530 and 2.81 will cost £36,415.

getmore4less

You need to compare over the fixed period not the full term.

the simple way and gets the best/easiest answer is to add the fees and make the payments the same,

2.81% £541 p/m £999 product fee
3.74% £605 p/m No product fee

left after 5 years
£126,000 3.74% £605pm £112,017
£126,999 2.81% £605pm £107,208

but you should get
£126,999 2.40% £605pm £104,647

Even with a broker fee you will save loads.

if you moved to one of the 2.3% rates and if we start with the £999 fees and £1,500 fees

£126,999 2.30% £605pm £104,031
£127,600 2.30% £605pm £104,593

that means you have around £500 to switch lender if you can get a 2.3% rate.


there are more factors like what the follow on rates are and what rates the new LTV can get you which could sway the choice

eg Nationwide have 2.39% £999 fee valuation and free legals or £500 cashback
there may be other fees to consider like your natwest discharge and money transfer that will eat into any saving.

ACG

MrCH wrote: »

Thanks ACG. I did initially go through a broker yes at a cost of £300.

I can only speak personally but we do product switches with the same lender for free where the balance is £100k(ish) plus. The commission covers us for the 2-3 hours work it takes.

amnblog

We too will handle these product transfers without Broker Fee if not a really small balance of under say £60,000.

Underneath that it is not worth picking up the risk on the Advice.

A Broker seeking £300 to do a NatWest switch is doing well out of it.