Fixed rate fees

Gnasher70

Hi, I'm going to choose a new 2 year fixed rate deal, the two I have in mind are ;
1.61% with a £995 fee for £453 a month
2.25% with no fee for £470 a month
My question is does adding the fee to the mortgage make it cheaper in the long run because the rate is lower or does paying the higher rate with no fee make it better even though its £15 more a month.
Thanks for any help!

MortgageMamma

It depends on how much you are borrowing, how long the term is and what you do at the end of your fixed rate period.

Its impossible to tell what a mortgage will cost over its entire lifetime as you make changes at certain stages - i.e. a 2 year fixed when it runs out you go find another product rather than stay on the lenders standard variable rate. Other factors impact it also - overpayments, additional borrowing, house moves, rate fluctuations.

There is quite a good mortgage calculator on this site which should give you an idea.

A simple way to do it is do a quote for yourself with the fee added, and a quote for the product with no fee, x the mortgage payments by the fixed rate incentive period and see which one works out cheapest over the incentive period.

You usually find the lower your mortgage amount the more sense it makes to take a fee free product.

Gnasher70

The loan is for £77k over 17 years and at the end of this 2 year fixed I usually go for another depending on what the rate is

getmore4less

first test is the interest only savings one.

£77000*(0.0225-0.0161)*2= £985.60

You cannot recover the fee on a repayment as the savings will be smaller.

no need for further checks.

Gnasher70

So are you saying it's not worth doing the one with the fee added option?

Retired_Mortgage_Adviser

That's right, it's not worth paying the fee at the level of borrowing required. Over the 2 year period of the fix, the fee option will cost you £587 more.

Gnasher70 wrote: »

So are you saying it's not worth doing the one with the fee added option?